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Chapter - XIII

CHAPTER - XIII
Power Purchase Cost Variations for FY2019-20

In the matter of True-up of Retail Supply Business for FY2019-20

in

O.P.No.15 of 2021
Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL)

and

O.P.No.37 of 2021
Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL)

Introduction

349. In this Chapter, the Commission proposes to deal with the power purchase cost
variations relating to the Retail Supply Business of APSPDCL, and APEPDCL for
FY2019-20 based on their respective filings.

350. APEPDCL and APSPDCL (in short “the DISCOMS”) have filed petitions on 04.01.2021
and 07.01.2021 respectively for true-up of their retail supply businesses for FY2019-
20. The petitions of APEPDCL and APSPDCL have been taken on record as O.P.No. 15
of 2021 & O.P.No. 37 of 2021 on 15.02.2021 and 22.02.2021 respectively. Separate
public notices (Annexure – 5) along with original petitions of the DISCOMS were placed
on the website of the Commission on 08.04.2021 inviting
objections/views/suggestions from the stakeholders and informing them that the web
hearing on these petitions would be held on 12.05.2021. The DISCOMS were also
directed to place public notices and copies of their petitions on their respective
websites for inviting views/objections/suggestions from all the stakeholders. The
Commission heard these petitions on 30.06.2021, 07.07.2021, 01.09.2021, and
22.09.2021. As the response to these petitions from the public was poor during the
above hearings, the Commission vide letter dated 21.10.2021 has directed both the
DISCOMS to publish notifications in newspapers to inform the public about their
filings, the final public hearing date of 24.11.2021, and to invite
views/objections/suggestions on the filings. In compliance with the directions of the
Commission, the DISCOMS have published notifications in one Telugu daily
newspaper ‘Sakshi’ on 29.10.2021 and in one English daily newspaper ‘Times of India’
on 30.10.2021 -
(Annexure-6) in their respective areas of operation, informing the public about their
filings and the date of final hearing through the web along with other relevant details.

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It was also informed in the notifications that all the interested persons/associations/
stakeholders/objectors may submit their written views/objections/suggestions in
respect of the said petitions before the date of the public hearing and those who want
to be heard in person/through their authorized representatives may appear before the
Commission on the said date of the public hearing through the web. Accordingly, the
petitions came up for final hearing through the web on 24.11.2021 in the presence of
Sri P. Shiva Rao, learned Standing Counsel for the petitioners, Sri Ch. Babu Rao, Sri
Srikanth Vijay Dhuri, Sri Shiva Kumar, and Sri M. Venugopal Rao, learned objectors
and Ms. Anannya Ghosh, Advocate. After carefully considering the material available
on record and after hearing the arguments of the learned objectors and learned
counsel for the petitioners, the Commission passes the following order.

DISCOMS’ Filings

351. The actual sales and actual power procurement quantity vis-a-vis approvals, filed by
the DISCOMS for FY2019-20 are given below:

Table1: Variance of actual sales and actual Power purchase quantity vis-a-vis

approvals for FY2019-20

FY2019-20
Particulars Unit
APEPDCL APSPDCL State

Approved Sales MU 21,995.58 37,166.70 59,162.28

Approved Losses % 8.94 10.67 10.03

Approved Power Procurement MU 24,154.32 41,604.68 65,759.00

Actual Sales MU 20,776.81 35,158.60 55,935.41

Actual Power Procurement MU 22,854.27 40,345.12 63,199.39

352. Based on the actual sales for FY2019-20, the variations in the despatch of energy and
power purchase costs, filed by the DISCOMS source wise and in total terms are given
in the tables below.

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354. In additions to the power purchase cost variations for FY2019-20, the DISCOMS have
also claimed the revenue variations and carrying cost on allowable power purchase
cost as shown below:

Table 6 : Total True-Up for FY2019-20

S.
Particulars EPDCL SPDCL TOTAL
No.

A Expenses True-up 272.12 1286.65 1558.8

B Revenue True-up/(True-down) 354.02 357.62 711.64

C Total 626.14 1644.27 2270.4

Carrying Cost @12% interest Rate

D 75.14 197.31 272.45
(for one year)

E Total True-up 701.28 1841.58 2542.9

355. The DISCOMS have also stated that they have put in their best efforts in trying to file
the true-up petition along with the ARR filings for FY2021-22. However, due to delay
in completion of audit due to the Covid-19 pandemic, the true-up petition could not
be completed along with ARR and they filed the same immediately after completion of
statutory audit. Therefore, they requested the Commission to condone the delay in
filing the true-up petition.

356. That the huge deviation in despatches from the APPDCL plant at Krishnapatnam is
due to the coal shortage and hence they have procured more power from thermal IPPs
to replenish the same. The energy from NCE/RE was procured on a geographical basis
as per government orders and hence there are huge variations in despatches from
NCE/RE sources. There is a shortfall in Generation from Gas based projects due to
partial availability of Gas and lesser availability of power from CGS Stations. They
have also stated that to meet the shortfall in energy from the committed sources, an
additional quantum of power has been procured from Market Sources & others.

357. The DISCOMS have further stated that the Fixed Costs have been paid to various
sources based on their actual availability during the year. In respect of SWAP returns,
though there is a provision for fixed costs in the approval, the entire transaction was
shown under variable costs.

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358. That the variation in per unit weighted average variable cost from Rs.0.3 to Rs.0.5 per
is due to an increase in Fuel & transportation costs which are a pass-through as per
regulations and power from external sources was procured to make good the shortage
of power from the approved sources.

359. The relevant regulatory provisions referred to by the DISCOMS in their filings are
reproduced below:

(i) Regulation 4 of 2005:

Clause19:
"CORRECTIONS FOR "UNCONTROLLABLE" ITEMS AND "CONTROLLABLE" ITEMS AND
SHARING OF GAINS/LOSSES OF "CONTROLLABLE" ITEMS
The Distribution Licensee shall file its proposals for pass-through as well as sharing of
gains/losses on variations in "uncontrollable" items of ARR and "controllable" items
(indexed to external parameters) in accordance with clause 10."
Clause 10:
"MULTI-YEAR TARIFF FRAMEWORK AND APPROACH
10.1 The multi-year tariff framework shall be based on the following approach, for
calculation of aggregate revenue requirement and expected revenue from tariff and
charges.
10.2 Base Year:- Values for the Base Year of the Control Period will be determined
based on the audited accounts available, best estimate for the relevant years and other
factors considered appropriate by the Commission, and after applying the tests for
determining the controllable or uncontrollable nature of various items. The Commission
will normally not revisit the performance targets even if the targets are fixed on the basis
of base values of un-audited accounts.
10.3 Targets:- Targets will be set for items that are deemed by the Commission as
"controllable" which constitute operation & maintenance costs, financing costs, and for
distribution losses duly adhering to the Licensees' Standards of Performance
Regulation. Trajectory for specific variables may be stipulated by the Commission where
the performance of the applicant is sought to be improved upon through incentives and
disincentives.
10.4 Controllable and Uncontrollable items of ARR:- The expenditure of the Distribution
Licensee considered as "controllable" and "uncontrollable" shall be as follows:

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DISTRIBUTION BUSINESS

ARR Item "Controllable"/"Uncontrollable"

Operation & Maintenance expenses Controllable

Return on Capital Employed Controllable
Depreciation Controllable
Taxes on Income Uncontrollable
Non-tariff income Controllable

In addition to 'the above items 'the retail supply business shall include the following:

Retail Supply Business

ARR Item "Controllable"/"Uncontrollable"

Cost of power purchase Uncontrollable

10.5 Pass-through of gains and losses on variations in "uncontrollable" items of ARR:-

The Distribution Licensee shall be eligible to claim variations in "uncontrollable" items
in the ARR for the year succeeding the relevant year of the Control Period depending on
the availability of data as per actuals with respect to effect of uncontrollable items:
Provided that the Commission shall allow the financing cost on account of the time gap
between the time when the true-up becomes due and when it is actually allowed and
the corrections shall not be normally revisited.
10.6 Sharing of gains and losses on variations in "controllable" items of ARR:- The
Distribution Licensee in its annual filings during the Control Period shall present gains
and losses for each controllable item of the Aggregate Revenue Requirement. A
statement of gains and losses against each controllable item will be presented after
adjusting for any variations on account of uncontrollable factors.
10.7 For the purpose of sharing gains and losses with the consumers, only aggregate
gains or losses for the Control Period as a whole will be considered. The Commission
will review the gains and losses for each item of ARR and make appropriate
adjustments wherever required:
Provided that for the first Control Period, insofar as the gains and losses from the Retail
Supply Business of the Distribution Licensee are concerned, these will be shared with
the consumers on a yearly basis.
10.8 Notwithstanding anything contained in this Regulation, the gains or losses in the
controllable items of ARR on account of factors that are beyond the control of the
Distribution Licensee - force majeure - shall be passed on as an additional charge or
rebate in ARR over such period as may be specified in the Order of the Commission."
(ii) Regulation 1 of 2014:

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“12.5 True-up for Retail Supply Business

a. The Distribution Licensee shall include the power purchase cost variation over the
previous year Power Purchase cost in the Tariff Order as expense (in the event of
incurring excess cost)/rebate (in case of cost saving) in the ARR as a special item with
relevant details. To arrive the power purchase cost variation, the least of the following
power purchase quantity is to be considered: i) Actual power purchase quantity
procured by the DISCOMs for its consumers.

ii) Power purchase quantity computed based on actual sales except LT Agriculture sales.
LT Agricultural sales will be limited to Tariff Order quantity. These aggregated sales will
be grossed up with approved losses for the relevant year in the MYT orders.

b. Since the complete information of cost actually incurred relating to previous year will
not be available at the time of filing of ARR for a particular tariff year, the Licensee may
include provisional cost variation for the previous year in ARR filings which will be
subject to final correction by the Commission as and when final accounts for that year
become available.

c. The Licensees shall also include in the ARR the amounts to be collected on final basis
being the difference between the cost incurred based on audited annual accounts report
and costs provisionally approved by the Commission in the Tariff Order for the year
immediately preceding the previous year.

d. The amount to be trued-up for Retail Supply Business in a tariff year shall be
determined as follows:

Where,
σ௡௜ Summation extends over all Power Purchase sources i = 1, 2, …..,n
σ௡௜ ᇞ ‫݌ݎݐܥ‬ሺ௧ሻ True-up cost summed over all sources for the tariff year (t).

σ௡௜ ᇞ ‫ݒݎ݌ܥ‬ሺ௧ିଵሻ The Power Purchase cost summed over all sources based on

provisional estimates for the previous year (t-1)

σ௡௜ ᇞ ‫ݎ݌ܽܥ‬ሺ௧ିଵሻ The power purchase cost summed over all sources as approved in

Tariff Order for the previous year (t-1) as per the relevant Tariff

Order.

௡ ௡ ௡

෍ ᇞ ‫݈݂݊ܥ‬ሺ‫ ݐ‬െ ʹሻ ൌ ෍ ᇞ ‫ܾݐܿܽܥ‬ሺ‫ ݐ‬െ ʹሻ െ ෍ ᇞ ‫ݒݎ݌ܥ‬ሺ‫ ݐ‬െ ʹሻ

௜ ௜ ௜

(The Difference between actual power purchase cost as per Audited Balance

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Sheet for (t-2) year and provisional power purchase cost of the year (t-2) adopted
in the year (t- 1) by the Commission

σ௡௜ ᇞ ‫ܾݐܿܽܥ‬ሺ‫ ݐ‬െ ʹሻ The actual power purchase cost summed over all sources
based on the audited balance sheet for the year (t-2).

σ௡௜ ᇞ ‫ݒݎ݌ܥ‬ሺ‫ ݐ‬െ ʹሻ The Power Purchase Cost summed over all sources based on

provisional estimates adopted in year (t-1) for the year (t-2).

μ (t-2) Charges on Ineligible items and Interest amounts paid on capital

borrowed for financing the power purchase cost where they have been included in
determination of power purchase cost in the accounts for the year (t-2).

………………………

……………………….

σ௡௜ ᇞ ‫݌ݎݐܥ‬ሺ‫ݐ‬ሻ can be either a positive or a negative figure

………………………
………………………”
Views/Objections/Suggestions

360. In response to the public notices, views/objections/suggestions from many

individuals/organizations have been received. The list of Objectors who submitted
written submissions and attended the web hearing is enclosed as Annexure-4. All the
relevant objections and the DISCOMS responses to the same are discussed in the
following paragraphs.

361. AP Textile Mills Association advanced that though condonation of delay in filing the
true-up is within the powers of the Commission, it may not do it without some punitive
costs to the DISCOMS. That the reasons for delays in filings are routinely repeated
every year. The objector further stated that though APSPDCL confirmed that the
figures adopted for finalizing true-up are audited figures, APEPDCL has not confirmed
the same explicitly in its petition. That APEPDCL’s audited balance sheet for FY 2019-
20 is not available on its website to submit their views. That fixed costs paid should
be in proportion to the actual availability achieved unless there is a backing down by
APSLDC. The objector cited some examples of power plants including hydel plants
where the fixed costs claimed do not commensurate with the availability
achieved/actual dispatch. The objector raised several questions regarding the
variations in energy dispatches, fixed costs, and variable costs compared to that
approved by the Commission in respect of CGS, APGENCO stations, APGPCL, etc.,
and sought explanations from the DISCOMS on the discrepancies/anomalies. That
the claims towards revenue true-up are not supported by any regulatory provisions

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as stated by the Commission in the True-up order in OP 5O /2019, OP 1&2 2016.

Hence, they opposed the claims towards revenue true-up. That the carrying cost is an
altogether unreasonable claim and should be disallowed as the delay is entirely due
to the DISCOMS.

DISCOMS’ Response: That due to the Covid-19 pandemic, there is a delay in

finalizing the audited accounts for FY2019-20 and hence there is a delay in filings.
That the audited annual accounts of the DISCOMS for FY 2019-20 are available on
their website. That several reasons such as a shortfall of 2500 MU of generation from
APPDCL plant and gas-based projects and wide variations in D to D energy
transactions, etc. caused variations in procurement of energy. That the actual energy
dispatch is not correlated to the payment of fixed costs for a generating station. That
the fixed costs are paid as per PPA conditions, at the tariff as determined by the
appropriate Commission or discovered through competitive bidding and based on
availability. Fixed charges for hydel plants are based on machine availability,
hydrological conditions, and PPA conditions. That the tariffs of CGS are determined
by the CERC in accordance with the Regulations specified. The expenditure is
incurred by the DISCOMS after a prudent check of the claims by CGS. Therefore,
exaggerated claims have not been made by them towards fixed charges.

That any variation in sales quantum would impact the power purchase costs which
is uncontrollable. That the DISCOMS could recover their entire approved/allowable
expenditure, if only the approved Revenue is also recovered. That not considering
actual revenue, would deprive the DISCOMS of their legitimate claim for the actual
expenditure prudently spent. In response to the objections on carrying costs, the
DISCOMs have stated the same reasons as in the case of the delay in filing the true-
up petitions.

362. Sri M. Thimma Reddy stated that the increase in transportation costs cannot be the
reason for the increase in variable costs in the range of 17.45% to 35.33% as there is
no change in the coal price index and the railway freight tariff for coal might have
increased only by 5 to 9%. A large number of coal-based thermal power plants of CGS
are located near coal mines, but the increase in variable costs claimed for these plants
is higher at 35.33%. As the reasons adduced by DISCOMS for the increase in variable
costs are not sustainable, the same shall not be allowed. That the increase in variable
costs due to inefficient operation of power plants should not be allowed. The present
application of the DISCOMS does not throw any light on these aspects. That if coal
was diverted from APGENCO units to APPDCL units, about Rs. 172 Crores would have
been saved. The Commission in the Tariff Order directed the Licensees to submit
quarterly reports on the savings achieved through the diversion. But, the DISCOMS
have failed to achieve the savings as directed by the Commission. He also objected to

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the abnormal increase in the variable costs claimed by the DISCOMS for FY 2019-20
for gas stations as the actual gas prices do not justify such an increase. That he
requested the Commission not to allow the AT&C losses over and above the approvals
as the same are due to the inefficiencies of DISCOMS. He also opposed the claims on
carrying costs attributing the delays in the filings on the DISCOMS and stated that
the rate of interest as per the present scenario is to be taken in case the carrying cost
is allowed. That if the DISCOMS are entitled to recover 50 percent of their losses of
FY2019-20 from the government as per the UDAY agreement, then 50% of that true-
up amount needs to be recovered from the GoAP.

DISCOMS’ Response: That they paid the variable charges after a thorough scrutiny
of the actual bills claimed by the generators, norms in the PPAs /Regulations. The
pass orders on the bills are internally audited and confirmed by the statutory auditors
as well. That a total amount of 18.8 Lakh MT coal was planned for diversion from
RTPP to APPDCL units during the FY 2019-20. The targeted diversion could not
materialize fully and hence the cost savings realized are meager and have been
subsumed in the variable cost calculations. As regards AT&C losses, APSPDCL stated
that the true-up has been claimed in accordance with the 1st amendment to
Regulation 4 of 2005 and approved losses as per the retail tariff order. As regards the
taking over of financial losses by the government, APSPDCL stated that as true-up of
distribution cost, network cost, revenue, etc., is not allowed, the receipts from the
GoAP towards 50% of losses for FY 2019-20 need to be adjusted at the time of true-
up of distribution/retail supply business at the end of the control period. APEPDCL
stated that it has shown a small profit for FY2019-20 and hence it has not received
any amount from the government under the UDAY scheme. In response to the
objection on carrying cost claims, their reply is similar as stated supra. The DISCOMS
have also stated that the fixing of interest rate on carrying costs is under the purview
of APERC.

363. Sri M. Venugopala Rao has stated, among other things, that in view of the reduction
in power purchase and sales vis-a-vis approvals given by the Commission for the
FY2019-20, the DISCOMS’ claim for true-up of a hefty sum of Rs.1841.58 crores
needs thorough examination. That the DISCOMS have not submitted the relevant
information relating to the increase in fuel and transportation costs source-wise and
the same need to be examined to ascertain justifiability or otherwise of such additional
costs in view of the huge increase in variable costs. That the DISCOM to DISCOM
transfer of energy is shown as 4854.88 MU against 616.34 MU approved by the
Commission. Short-term and other purchases are shown as 2486.30 MU against
390.44 MU approved by the Commission. It shows that, instead of first meeting its
requirement from committed sources, APSPDCL has transferred a substantial

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quantum of power to APEPDCL and purchased additional power from short-term and
other sources. He requested the Commission to adjust the income from renewable
energy certificates accrued during FY 2019-20, if any, from the permissible claims
under true-up in respect of APSPDCL. He also requested the Commission to adjust
the amounts received from the government under the UDAY scheme from the
permissible claims. He further stated that GOAP has to take over Rs.1920.20 crores
out of the total loss of APSPDCL under the UDAY scheme and it has received
Rs.277.06 crores only to date in this regard. Therefore, he requested the Commission
to adjust the balance of Rs.1643.14 crores dues from GOAP to SPDCL towards claims
permissible under the subject true-up. That the true-up claims of DISCOMS for
additional power purchased from the markets at prices exceeding the upper limit fixed
by the Commission should be rejected in consonance with the directions given in the
retail supply tariff order for FY2019-20. That for FY 2019-20 ending March 2020,
completion of the audit does not require a period of about nine months. For the failure
of the DISCOM to file the true-ups in time, the consumers should not be penalized in
the form of carrying costs. Therefore, he stated that the period of delay in filing the
true-ups while computing the carrying costs should be excluded. He also opposed the
revenue true-up. That it is not known whether DISCOMs have factored the surplus
power available, the quantum of surplus power backed down, variable costs of the
backed down stations, fixed charges paid for backed down energy, per unit price of
power purchased through exchanges, energy backed down to accommodate energy
from must-run wind and solar power, failure of the thermal plants to lift full quantum
of coal, CTU charges and losses, interest on working capital borrowed for short-term
purchases, for computing the savings in power purchase costs.

DISCOMS’ Response: That even though there is a reduction in the sales/power

purchase quantum vis-a-vis the approvals, the true-up is necessitated in view of the
increase in the per unit cost of power than that approved. That, there is a marginal
decrease in fixed cost from Rs 1.12/Unit to Rs.1.02/Unit whereas the variable cost
increased steeply from the approved level of Rs 2.92/Unit to Rs.3.42/Unit which
works out to 17.12%. The variable costs incurred are actual and payable after a
thorough scrutiny of each & every monthly invoice raised by the Generators and
supported by certified data on actual parameters and costs. The actual Power
Purchase Costs also get audited by the statutory auditors and there is no
misrepresentation of information whatsoever in this regard. That the power is
procured combinedly considering the requirements of all the DISCOMS duly following
a common merit order. The energy procured is allocated among different DISCOMS
based on the share of their capacities in the PPAs. The actual energy requirement of
a DISCOM is compared with the actual allocation and based on the same, DISCOM
to DISCOM energy is decided. Therefore, the objector cannot conclude that huge

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energy is procured by APSPDCL to transfer it to APEPDCL. APEPDCL stated that the

steep increase in DISCOM to DISCOM drawal for FY 2019-20 compared to the
approval in RSTO, is due to the G.O.Rt.No.116 Dated 01.10.2019 issued by the State
Government which allocated RE projects on a geographical basis with retrospective
effect from 1st April 2019. APSPDCL has stated that it sold 1880 MU of RE to APEPDCL
and income from RECs in NIL.

That the Govt. of AP shall take over 25% of the loss for FY2018-19 during FY2019-20
as per UDAY MOU. The loss of APSPDCL for FY2018-19 as per the audited reports is
Rs. 7680.08 Crores. The GoAP has to take over 1920.20 Crores, i.e. 25% of Rs.7689.08
crores. However, APSPDCL has received Rs. 277.06 Crores only from GOAP towards
losses. As other items such as distribution cost, network cost, etc., are not allowed
for true-up now, it is essential to carry out adjustment of the amount received from
GOAP during the true-up of the Retail supply business at the end of the control period.
APEPDCL has furnished a similar response as furnished to the other objectors stated
supra on this aspect.

That the backed down generation during the FY2019-20 is to the tune of 10,300 MU.
That surplus power gets backed down as per the Grid conditions and in accordance
with the relevant Regulations including Indian Electricity Grid Code (IEGC). The
details of overall Fixed Costs paid, total dispatched energy and fixed cost attributable
to the backed down energy for
FY2019-20 were estimated and indicated in the table below.
Table 7: Backing down energy furnished by the DISCOMs

Energy Dispatch (MU) 63,200

Energy Availability (MU) 73535

Fixed Cost Paid (Rs Crs) 6284

Fixed Cost per Unit of Energy Availability (Rs/Unit) 0.85

Fixed Cost paid for Backed Down Energy (Rs Crs) 883.2

The DISCOMS have stated that they were constrained to back down thermal power in
order to accommodate purchases from Must Run Stations. That the DISCOMS are
obligated to pay Fixed Costs based on the availability certified by APSLDC. That the
approved price of Market Purchases is Rs.4.00/Unit and the weighted average price
of power purchases from the market and other short-term sources is Rs.3.97/Unit
for FY2019-20, which is lower than the approved value. The DISCOMS have furnished
a similar response as furnished to the other objectors supra as regards their claim on
revenue true up, delay in filings, and carrying costs.

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364. Sri Ch. Babu Rao, similar to Sri M. Venugopala Rao elaborated in detail, among other
things, the problems associated with surplus RE in the State such as the availability
of abnormal surplus energy, on one hand, necessitating backing down of huge
quantum of thermal energy and purchase of short-term energy from the market at
significant costs on the other hand, etc.

DISCOMS’ Response: The DISCOMS denying the contention of the objector have
stated that the surplus and deficit time blocks occur at different points in time. All
deficit time blocks warrant procurement of market power to maintain 24X7 supply to
all the categories of consumers except the Agriculture category. All surplus time
blocks warrant backing down of generation as per Merit Order Dispatch (MoD) List.
This is the procedure followed by APDISCOMS without compromising on commercial
prudence and optimization of power procurement costs. That the merit order dispatch
list is taken as the basis for market procurement decisions, That the DISCOMS are
working with the public interest in mind and are trying their level best to optimize the
power purchase costs.

365. A.P.Ferro Alloy Producers Association quoted the extracts of the relevant tariff orders
of the Commission in their submissions and stated that the delays in filing of both
provisional & final true-up are attributable to the DISCOMS and hence should not be
allowed. That the MYT Tariff Regulations have become outdated and need to be
revised. That the DISCOMS have not mentioned the plant availability factors achieved
by the thermal plants for which they have claimed the true-up costs. In many
instances, the fixed costs claimed by DISCOMS are the same as the approved costs
though energy dispatches have gone down. That in accordance with the APERC Tariff
Order dated 22.02.2019, the approved figures in the APGENCO Multi-Year tariff Order
for the fourth control period (FY2019-20 to FY2023-24) will have to be considered
while computing the True-Up of Fixed Costs for APGENCO Stations for FY 2019-20.
That the fixed charges for APPDCL SDSTPS-Stage-I will have to be taken in accordance
with the Order dated 02.03.2019 issued in OP 47 of 2017, and the fixed charges for
RTPP-IV will have to be taken in accordance with the Order issued dated 31.12.2020.
That the Commission may restrict the Variable Charge Rates for the APGENCO plants
as per the Base Variable Charge Rates approved by the Commission in the relevant
tariff orders until the DISCOMS and APGENCO have ensured compliance with the
directives of the Commission in the Orders dated 22.09.2019 and 29.04.2019
respectively. That though power purchase is recorded by Statutory Auditors, the same
has to be subjected to prudent checks since DISCOMS have not submitted sufficient
data. That in the light of the Hon’ble High Court Order, the Commission may approve
Power Purchase for Wind and Solar plants at Rs. 2.43/kWh and Rs. 2.44/kWh
respectively. That the DISCOMS have not submitted the details of short-term

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purchases made. That the Commission may limit the price of the purchase from Short
Term Sources to the average power purchase cost determined in the Order dated
22.02.2019, i.e. at Rs. 4.02/kWh for each instance of short-term purchases made by
the Petitioners, and disallow any amount towards short-term purchases that has
exceeded Rs. 4.02/kWh. That no truing up on account of revenue can be considered
when the inclusion of the same is yet to be adjudicated upon by the Commission. That
the consumers ought not to be burdened with the carrying cost on account of delays
in the filings. Further, the objector indicated in the submissions the true-up cost
computed by them based on the data available with them.

366. Arcelor Mittal Nippon Steel India Limited (AMNSIL) stated, among other things, that
the Resolution Plan, as approved by the SC Judgment expressly provides that all
claims and liabilities of Essar Steel India Limited (ESIL) (facing corporate insolvency
process), arising till the Effective Date stood waived, extinguished, abated, and
discharged in perpetuity. That in other words, as a matter of law, claims, and
liabilities, which may have arisen or accrued against ESIL till the Effective Date, cease
to exist against AMNSIL (ESIL name changed to AMNSIL) till the Effective Date. The
objector quoted the relevant extract of the Resolution Plan in this regard.

That in view of the Code and the SC Judgment, the terms of the Resolution Plan are
binding on all the stakeholders including APEPDCL. That most pertinently, the
Hon’ble Supreme Court in the SC Judgment has further clarified and confirmed that
the successful Resolution Applicant’s ability (i.e., AMNSIL’s ability) to run the
business of the corporate debtor (i.e., ESIL) after the approval of the Resolution Plan
would not be hindered by earlier claims. That in view of the above factual and legal
position, AMNSIL is also entitled to be permitted to operate on a “fresh slate.”
Accordingly, true up charges for the period prior to the Effective Date, as a matter of
law, cannot be imposed on AMNSIL as the same stand waived, extinguished, abated,
and discharged qua AMNSIL in perpetuity from the Effective Date. Therefore, the
objector requested the Commission to kindly consider the above legal position and
declare, as a matter of policy that entities that have undergone successful corporate
insolvency resolution under the code resulting in extinguishment of liability for the
period prior to such resolution, shall be exempt from payment of True-Up charges for
the period prior to such resolution. That, in the present facts and circumstances, to
direct that the period from 01.04.2019 to 15.12.2019 would be excluded qua them for
the computation of True Up Charges for the FY2019-20 and that the True-Up Charges
for the said financial year be proportionately reduced pursuant to such exclusion.

367. Sri Peeta Raman has stated that those living in rented houses and shifted to new ones
have to now shell out two to three times more as electricity charges for the power
consumed by the previous tenants between 2014-15 and 2018-19 fiscal years as the

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landlords are in no mood to oblige them. That the true-up charges had come as an
additional burden at a time when there is a struggle to eke out a living owing to the
economic downturn triggered by the Covid pandemic. If true-up charges are imposed,
it may have a direct effect on essential commodities. That the industrial sector is now
slowly growing up after the Covid-19 pandemic and if any True-Up charges are
imposed, it would adversely affect the interests of the industrial sector. That in the
light of the above, it would be appropriate if the Government bears these charges and
therefore APERC may advise the government accordingly.

368. During the public hearing on 24.11.2021, Sri Ch.BabuRao, Sri Venu Goppala Rao,
FAPPCI represented by Sri Srikanth, and Sri Shiva Kumar made oral submissions
similar in line with their written submissions.

Commission’s views, analysis and decision:

369. In light of the objections to the proposals of the DISCOMS and the replies furnished
by the DISCOMs to the same as discussed supra, the following would emerge for
consideration of the Commission.

A. Admissibility of the Claims on variations in revenue true-up.

B. Admissibility of the Claims on variations in Power purchase cost and
C. Admissibility of the Claims on carrying cost in respect of the variations in
power purchase cost
A. Admissibility of the Claims on variations in revenue true-up

370. All the objectors in one voice opposed the claim for revenue true-up on the ground
that the relevant Regulations do not envisage annual revenue true-up. In addition to
this, the objectors have raised their objections on several other counts. In consonance
with its earlier decisions the Commission is not inclined to accept the revenue true-
up claims of DISCOMs as there is no regulatory provision for annual true-up of
Revenue. The DISCOMs however, relied on the need for true-up along with the that of
expenditure and referred to their letter dated 15.01.2017, which sought, inter alia,
revenue true-up. In the Commission’s view, unless the request of the DISCOMs is
accepted and the relevant regulation amended accordingly, their letter has no sanctity
in law. Accordingly, the claim on Revenue true-up is disallowed.

B. Admissibility of the Claims on variations in Power purchase cost

371. In the light of some of the objectors' stiff opposition to the true-up system, it is
pertinent to reproduce the Commission’s statement at Para 325 of the Retail Supply
Tariff Order for FY2019-20 below:

“325 .The power purchase costs and energy availability/despatches projected by the
Commission are estimates only. The Commission is aware of the fact that actual values
may differ from these projections. For some of the stations, the variations may be

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positive and for others, negative. The Commission has endeavored to minimize the effect
of these variations on the projected purchase costs/energy availability/despatches to
the extent possible. The Commission will subsequently carry out the necessary revision
of these power purchase Costs as per the relevant Regulation.”

372. When the tariffs are fixed on the basis of estimated costs, the gap between the
estimates/projections and the actuals is bound to occur and a zero gap is impossible
to achieve given the practical constraints in making ideal estimates and the resulting
variations which are plus or minus have to be adjusted subsequently. The
Commission has been striving in every RSTO to minimize this gap to the extent
possible. Regulation 1 of 2014 provides for a clear mechanism for dealing with power
purchase cost variations. Though, the said Regulation has not employed the phrase
‘true-up’, this phrase has been coined in the power sector and being used by every
forum including the Hon’ble APTEL. The true purport of the Regulation is to allow
variation between estimated expenditure and actual expenditure. For convenience
this exercise is called true-up / true-down. In real sense, recovery of the expenditure
incurred in excess of the estimate can neither be treated as imposition of additional
burden on the consumers nor termed as unjust or illegal. This amount is part of
actual tariff as against the estimated tariff paid by the consumer, pending finalization
of the accounts. Indeed without such exercise, the licensees will not be able to recover
the actual expenditure incurred by them in supplying power to the consumers. There
is therefore no justification for the stake holders to raise objections to the initiation of
this exercise and recovery of the additional costs legitimately incurred by the
licensees.

Apart from the statutory regulation mandating this exercise, non-observance of this
essential process by certain ERCs was frowned upon by the APTEL in its order dated
11-11-2011 in O.P.No.1 of 2011. The relevant part of the order reads as under.
“65. In view of the analysis and discussion made above, we deem it fit to issue the
following directions to the State Commissions:
(i) Every State Commission has to ensure that Annual Performance Review, true-up of
past expenses and Annual Revenue Requirement and tariff determination is conducted
year to year basis as per the time schedule specified in the Regulations.
(ii) It should be the endeavour of every State Commission to ensure that the tariff for the
financial year is decided before 1st April of the tariff year. For example, the ARR & tariff
for the financial year 2011- 12 should be decided before 1st April, 2011. The State
Commission could consider making the tariff applicable only till the end of the financial
year so that the licensees remain vigilant to follow the time schedule for filing of the
application for determination of ARR/tariff.

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(iii) In the event of delay in filing of the ARR, truing-up and Annual Performance Review,
one month beyond the scheduled date of submission of the petition, the State
Commission must initiate suo-moto proceedings for tariff determination in accordance
with Section 64 of the Act read with clause 8.1 (7) of the Tariff Policy. (iv) In
determination of ARR/tariff, the revenue gaps ought not to be left and Regulatory Asset
should not be created as a matter of course except where it is justifiable, in accordance
with the Tariff Policy and the Regulations. The recovery of the Regulatory Asset should
be time bound and within a period not exceeding three years at the most and preferably
within Control Period. Carrying cost of the Regulatory Asset should be allowed to the
utilities in the ARR of the year in which the Regulatory Assets are created to avoid
problem of cash flow to the distribution licensee.
(v) Truing up should be carried out regularly and preferably every year. For example,
truing up for the financial year 2009-10 should be carried out along with the ARR and
tariff determination for the financial year 2011-12.
(vi) Fuel and Power Purchase cost is a major expense of the distribution Company which
is uncontrollable. Every State Commission must have in place a mechanism for Fuel and
Power Purchase cost in terms of Section 62 (4) of the Act. The Fuel and Power Purchase
cost adjustment should preferably be on monthly basis on the lines of the Central
Commission’s Regulations for the generating companies but in no case exceeding a
quarter. Any State Commission which does not already have such formula/mechanism
in place must within 6 months of the date of this order must put in place such formula/
mechanism.”

Therefore, the Commission is under statutory obligation to entertain and adjust the
claims made by the DISCOMS.

373. The Commission, in order to examine the power purchase cost variations, has verified
the audited accounts reports of the DISCOMS which are also available on their
websites. The contention of some objectors that the audited information is not
available on their websites is unfounded. The audited accounts which show the power
purchase costs include other network costs, etc. The Commission has obtained the
breakup of the details from it and arrived at the expenditure booked related to the
power purchase cost for the FY2019-20. The power purchase cost shown in books of
account and power purchase cost filed in true-up petitions are given below:

Sl. DISCOM Power purchase cost Allowable Power purchase

No. shown in the audited cost shown in the true-up
books for FY2019-20 petitions for FY2019-20

1 EPDCL 9759.41 Cr. 9601.25 Cr.

2 SPDCL 17911.12 Cr. 17525.89 Cr.

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374. As can be seen from the above table, the power purchase costs filed for claiming
variations over the Commission’s approvals, are less than the costs booked in the
books of accounts. However, as pointed out by one of the objectors, the DISCOMS are
not entitled to claim variations in power purchase costs based on the costs booked in
the audited accounts alone. Therefore, the Commission has prudently checked other
relevant data related to the Claims as detailed in the following paragraphs.

375. To begin with, the Commission has examined the sales variation as shown below:

Table 8: Sales Variations for FY2019-20

FY 2019-20
S.No. Description
EPDCL SPDCL TOTAL

1 Agl sales as per Audit Report (MU) 2422.77 8938.62 11361.39

2 Agl sales as per Commissions’ order (MU) 2090.27 9501.2 11591.47

3 Difference Agl sales (MU) (1-2) 332.5 -562.58 -230.08

4 Total sales as per Audit Report (MU) 20776.66 35158.6 55935.26

5 Total sales as per Tariff order (MU) 21,995.58 37,166.70 59,162.28

As could be seen from the above table, the total audited sales of each DISCOM are
less than that approved by the Commission in the RST Order for FY2019-20. As per
regulations in vogue, the free agricultural sales shall be limited to the quantity
approved in the RST Order. Compared to the approvals, the Agl. sales are more by
332.5 MU in respect of APEPDCL and less by 562.58 MU in respect of APSPDCL. It is
pertinent to mention here that in line with the direction in RST order FY20, the
Commission has approved the excess agl. sales for APEPDCL vide order dated
27.01.2021 in O.P.No.32 of 2020 and accordingly allowed APEPDCL to claim a
subsidy of Rs.204.82 Cr. from the GoAP towards this additional quantum of
agricultural sales supplied to the farmers freely as per the GoAP policy. Therefore, in
view of the above order, the excess agricultural sales are treated as approved sales,
and accordingly, the subsidy received from the GoAP towards the additional sales
would be adjusted against the actual true-up amount to be permitted in this order in
respect of APEPDCL. Thus, even though the sales considered by the EPDCL are 20445
MUs for arriving at the allowable power purchase requirement, the Commission has
considered the total sales as per audited books for consideration of the variations in
power purchase costs. As the agricultural sales in respect of APSPDCL are less than
the approved quantum, the limitation regarding the quantum of agl. sales does not
arise for them. However, the subsidy received from the GoAP for the difference between
the sales approved in the RST order and actual sales would be adjusted against the
true-up amount to be determined in respect of APSPDCL in this order.

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One of the objectors has pointed out that the inefficiencies on account of the AT&C
losses of the DISCOMS ought not to be passed on to the consumers. In this regard,
the objector may note that the regulation in vogue safeguards the interests of the
consumers from passing on of such inefficiencies to them. The Commission has
computed the power purchase requirement by grossing up the actual sales with the
approved losses as per the regulation instead of accepting DISCOMS’ claims in this
regard. The power purchase requirement computed in the above manner is less than
the actual power purchases made by the DISCOMS as shown in the table below.
Table 9 : Power Purchase Considered by the Commission for FY2019-20

S. FY 2019-20
Description
No. EPDCL SPDCL TOTAL

1 Total sales as per Audit Report (MU) 20,776.81 35,158.60 55,935.41

Approved T &D losses(%) in the RST Order for
2 8.94 10.67 10.03
FY20
Power purchase requirement based on total
3 22816.62 39358.11 62174.73
actual sales at the approved losses
Actual power purchase quantum based on total
4 22854.27 40345.12 63199.39
sales as per True-up filings for FY20
Power purchase considered by the
5 22816.62 39358.11 62174.73
Commission for true-up (min of 3 & 4)

376. After arriving at the power purchase requirement as discussed above, the Commission
has examined the actual energy dispatches from various sources vis-a-vis the
approved quantum from each source. The despatches are considered for the two
DISCOMS put together in order to optimize the power purchase costs as shown below.

Table 10: Deviations in Energy Despatches for FY2019-20

Energy (MU)
Sl.NO Source
Approved Actual Variation

1 APGENCO Thermal 15,931.32 15,824.42 -106.90

2 APPDCL 10,489.00 6,648.23 -3,840.77
3 CGS 15,612.05 14,698.52 -913.53
4 IPP 4,492.57 6,747.71 2,255.14
5 GAS 3,245.29 2,078.01 -1,167.28
6 Hydel 3,197.80 3,518.30 320.50
7 NCE 16,318.72 13,223.02 -3,095.70
8 Market & Others 594.00 2,749.30 2155.30

9 Swap Power return -4,121.85 -3,295.27 826.58

10 Sale of Power 0.00 -17.52 -17.52

11 Total 65,758.90 62,174.73 -3,584.17

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As can be seen from the above table, there are significant under despatches from
APPDCL and non conventional sources. The DISCOMS have stated that the under
despatch from APPDCL is due to the coal shortage and the resulting shortage of energy
was met from the market and other IPPs which is justified.

377. The Commission would now examine the power procurement costs. The main power
suppliers to the DISCOMS are APGENCO, the State power generating company,
central generating stations (CGS), private developers of non-conventional power
plants, and a few IPPs. The payments to all these generators are governed by the PPAs
and the tariffs approved by the appropriate Commission. As stated by one of the
objectors, the payments to APGENCO have to be made in accordance with the tariff
orders issued by the Commission for the respective stations. The payments to the CGS
have to be made in accordance with the orders issued by the CERC for the respective
stations. Similarly, the payments to NCE developers and IPPs have to be made as per
the PPAs and tariffs approved by the Commission. In respect of thermal stations, the
payment of fixed costs is based on cumulative normative availability achieved and
variable costs are as per the norms approved by the appropriate Commission. One of
the objectors opposed the payment of full fixed costs even though there is less
generation from some stations, particularly RTPP-IV of APGENCO and APPDCL. The
DISCOMS while furnishing replies to the objectors have stated that they paid fixed
costs corresponding to the reduced availability. The Commission has examined the
details of the cumulative availability of all APGENCO stations that were furnished to
the objectors also and found that the cumulative availability of RTPP Stage I, III, and
IV and APPDCL is less than the normative availability. In respect of all other thermal
stations, the cumulative availability is above the normative availability. In this regard,
OP.No. 43 of 2020 was filed by APPDCL before the Commission for adjudication of a
dispute relating to the fixed costs payable to APPDCL due to the diversion of coal from
RTPP to APPDCL under the Flexi Coal Scheme. The O.P. is pending. Hence, keeping
in view the financial quagmire of the DISCOMS and pendency of the above OP, the
Commission accepts the payments made to all APGENCO stations as filed in the
petitions as per the tariffs approved for the respective stations. However, after the
Commission disposes of above O.P., the DISCOMs are directed to make available the
actual details of fixed cost payments made to APPDCL and RTPP-I & III for FY2019-
20 based on the actual cumulative availabilities to adjust the variations resulting on
account of the above payments in the order on the immediate FPPCA quarterly filings.
In respect of CGS, the CERC has not issued tariff orders for
FY2019-24 for any of the thermal stations that are supplying power to APDISCOMS
except in respect of Ramagundam Stage-III so far. On examination of the fixed costs
payments to all the CGS with reference to the Commission’s RST Order for FY2021-
22 in the absence of any reference, the fixed costs paid in respect of Simhadri Stage-

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I, NTPC Kudgi stage-I, and NTECL Valluru are found to be excessive and the DISCOMS
have stated that the variations in the fixed costs compared to FY2021-22 are more as
the capacities availed from the said stations were high during FY2019-20. The
Commission therefore accepts the fixed costs made to CGS as filed and directs the
DISCOMs to make available the details of the actual fixed cost payments to CGS based
on the cumulative availabilities after the CERC issues the final tariff orders for the
respective stations for FY2019-24 in order to adjust the resulting variations in the
order on the immediate FPPCA quarterly filings. On examination of the per unit
variable costs filed in the petitions for all the thermal stations, these costs are found
to be abnormal in respect of RTPP-IV and two CGS. The same appears due to the
loading of the past costs as per the information furnished by the DISCOMs
subsequently. To sum up on this aspect the decision of the Commission. All the
payments to NCEs are claimed as per the PPAs and there are Rs.465 Cr. provisions
in payments. One of the objectors requested the Commission to consider Rs.2.43 Cr.
and Rs.2.44 per unit in respect of wind and solar respectively for finalization of the
true-up. However, in view of the Hon’ble High Court Judgment dated 15.03.2022, the
Commission has no option except to accept the claims of the DISCOMS in respect of
NCEs in toto. The excess payments to gas IPPS were adjusted in the PP cost of FY2020-
21 as per the information furnished subsequently by the DISCOMS. Further, the per
unit power purchase cost from the market is less than that approved in the RST Order
for FY 2019-20. Hence, the same is accepted without any adjustments.

The D-D transactions between APSPDCL and APEPDCL are primarily due to the
allocation of the NCE sources on a geographical basis after the issuance of the RST
order by the Commission. The same are verified and found to be justified.

As regards the adjustment of UDAY amounts received from the GoAP as pointed out
by some of the objectors, the amounts received by the APSPDCL are for the FY2018-
19 towards total loss and the Commission has not determined total true-up of retail
supply business for 3rd control period except the variations in power purchase costs
and distribution costs. Therefore, the Commission would consider the same as and
when the total true-up for the retail supply business is taken up for the 3rd control
period.

As regards the data insufficiency in the filings and audit reports as pointed out by the
objectors, the DISCOMS are already directed to place all the regulatory information
on their websites through a separate proceeding of the Commission. Further,
Regulation 1 of 2022 notified by the Commission recently mandates many
transparency measures on short-term power purchases. However, the DISCOMS are
directed to place the details in their websites of the power purchase costs
station-wise along with the details of the availability, PLFs, total capacity and

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their share including appropriate notes wherever necessary in order to ensure

transparency in power purchase costs and also for easy verification by the
stakeholders.

With regard to the backing down costs as pointed out by some of the objectors, the
fixed cost payments to thermal generators shall be made as per their availability based
on norms. Any lesser despatches from these stations due to lower demand during
some periods of the year and also to accommodate the NCE generation due to its
must-run status cannot be construed as baking down costs. The DISCOMS are
expected to furnish the replies carefully in this regard as there are no separate backing
down costs since the same are already subsumed in the fixed costs. The must-run
status to NCE generation has been granted due to its environmental friendliness and
it is to be harnessed as and when available due to storage systems not being
economical yet. The backing down costs arise only when an approved source is paid
fixed costs without utilizing it by procuring power from other sources at a higher price
than the variable cost of the source not despatched.

As regards the request of one of the objectors for an amendment to MYT tariff
regulations, the same is under the examination of the Commission.

Accordingly, the Commission has approved the true-up costs for FY2019-20 in respect
of APSPDCL and APEPDCL as Rs.1286.65 Cr and Rs.415.56 Cr. respectively. The
details of the true-up cost claims and that approved by the Commission station wise
are shown in the Annexures 1,2 & 3.

As the APCPDCL has been carved out from APSPDCL w.e.f. FY2020-21, the true-up
amount determined in this order in respect of APSPDCL is shared between them in
accordance with the power sharing ratios specified in the government order.
Accordingly, the share of APSPDCL in the true-up is Rs.815.81 Cr. and that of
APCPDCL is Rs.470.84 Cr. out of the total true-up amount of Rs.1286.65 Cr. approved
for FY2019-20 for the erstwhile APSPDCL.

Admissibility of the Claims on carrying cost in respect of the variations in power

purchase cost

378. The Commission has examined the following regarding the delays in the filings:

Date of filing Actual date of filing by Date of Finalisation of

to be made as the DISCOMs Annual Accounts
True-up
per the
Regulation SPDCL EPDCL SPDCL EPDCL

FY 2019-20 30.11.2020 07.01.2021 04.01.2021 26.12.2020 08.12.2020

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CHAPTER - XIV
Power Purchase Cost Variations for FY2020-21

In the matter of

TARIFF DETERMINATION FOR RETAIL SALE OF ELECTRICITY DURING FY2022-23

and True-up of Retail Supply Business for FY2020-21

in

O.P.No.122 of 2021
Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL)

O.P.No.123 of 2021
Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL)

and

O.P.No.124 of 2021
Andhra Pradesh Central Power Distribution Corporation Limited (APCPDCL)

Introduction

381. In this Chapter, the Commission proposes to deal with the power purchase cost
variations relating to Retail Supply Businesses of APSPDCL, APEPDCL, and APCPDCL
(In short, the DISCOMS) for FY2020-21 based on their respective filings, after
considering the views/ objections/suggestions submitted in writing and expressed
orally during the public hearings on various items of the claims and the views
expressed by the members of the State Advisory Committee.

The DISCOMS’ Filings for FY2020-21

382. The True-up claims of APSPDCL are shown below:

Table 13 : True-up claims of APSPDCL for FY2020-21

S.No. Items Rs Cr
A Power Purchase True-down -869.45
B Other ARR items of Retail Supply Business True-down -402.2
C ARR Items of Distribution Business True-up 618.1
D Revenue True-Up -1393.97
E Net True-Up 740.42
F Carrying Cost @ 12% Interest 88.85
G Total True Up (E+F) 829.27

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383. The True-up claims of APCPDCL are shown below:

Table 14 : True-up claims of APCPDCL for FY2020-21

S.No. Particulars Rs Cr
A Power Purchase True-down -377.52
B Other ARR items of Retail Supply Business True-down -274.33
C ARR Items of Distribution Business True-down -124
D Revenue True-Up -881.79
E Net True-Up 105.94
F Carrying Cost @ 12% Interest 12.7128
G Total True Up (E+F) 118.6528

384. The True-up claims of APEPDCL are shown below:

Table 15 : True-up claims of APEPDCL for FY2020-21

Approved in
Actual
the RST
expenditure Variation
Sl. No. Revenue Requirement Item order for
for FY2020-21 (Cr.)
FY2020-21
(Cr.)
(Cr.)
1 Transmission Cost 680.12 637.07 -43.05
2 SLDC Cost 20.27 21.43 1.16
3 Distribution Cost 2091 3016.81 925.81
4 PGCIL Expenses 579.03 381.69 -197.34
5 ULDC Charges 1.6 5.69 4.09
6 Network and SLDC Cost (1+2+3+4+5) 3,372.02 4,062.69 690.67
7 Power Purchase/Procurement Cost 11598.07 9912.84 -1685.23
Additional interest on Pension bonds of
8 315.8 333.77 17.97
APGENCO
9 Interest on Consumer Security Deposits 123.83 74.04 -49.79
10 Supply Margin in Retail Supply Business 14.87 12.55 -2.32
11 Other Costs, if any 75.12 123.6 48.48
12 Supply Cost (7+8+9+10+11) 12,127.69 10,456.80 -1,670.89
13 Cost of FY 19-20 adjusted 67.64 0.00 -67.64
Aggregate Revenue Requirement (6+12-
14 15,432.07 14,519.49 -912.58
13)
15 Total Revenue (16+17+18) 12,618.63 11,255.87 -1,362.76
Revenue from Current Tariff
16 12134.85 10772.96 -1361.89
(Net of Incentives)
17 Non-Tariff Income 431.11 424.28 -6.83
18 Revenue from Trading/CSS 52.67 58.63 5.96
19 Revenue Deficit/Gap (15-14) -2,813.44 3,263.62 450.18
Provisional true down for FY 2020-21
20 1515.99
adjusted in FY 2021-22 TO
21 Total True-Up Arrived 1,966.17

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385. The DISCOMS have also furnished the details of sales variations and the estimations
of power purchase requirements to be considered for arriving at the actual power
purchase costs.

Objections/Views/Suggestions

386. Sri M. Venugopal Rao and 13 others have stated, among other things, that the
Commission approved a provisional true down of Rs.3,373 Crores for FY2020-21 in
the Retail Supply Tariff Order for FY2021-22 which is the result of adopting the
interim tariffs for wind and solar plants as per the order of High Court. That the
DISCOMS have not submitted their true-up claims for FY2020-21 and the details of
the quantum of power backed down and fixed charges paid to APERC. In spite of the
reduction in power purchase costs and sales, DISCOMS claimed true-up amounts for
FY2020-21. That all the DISCOMS have claimed excess distribution cost over the
approved figures. That APSPDCL didn’t show any revenue from the sale of the
renewable energy certificates against Rs.718.05 crore approved by the Commission.
That true-up/true-downs for distribution business are not permissible under
provisional true-up and carrying cost needs to be considered for permissible true-up
only.

DISCOMS’ Response: That the decrease in power purchase cost in FY 2020-21 is due
to the reduction in the quantum of power purchase to the extent of 8700 MU because
of the Covid-19 pandemic effect and also due to the various measures taken by them
such as purchasing power at low prices in the exchanges, etc. That they have included
true-up claims for FY2020-21 in ARR filings for FY 2022-23. That because of the
power purchases from the market at lower prices during FY2020-21, they were able
to save power purchase costs to the extent of Rs 963 Crores. That out of the approved
total Power Purchase cost of Rs 31,346 Crores for FY2020-21, the DISCOMS have
incurred Rs. 26,421 Crores only, thus achieving an overall saving of Rs 4,925 Crs in
FY 2020-21. That out of this saving, APERC has already deducted a provisional true-
down of Rs 3,373 Crores from the ARR for FY2021-22. That RE plants have been
allocated on a geographical basis vide GO Rt No. 116, dated 01-10-2019 resulting in
the concentration of most of these plants in the APSPDCL area, and accordingly,
power was purchased from them. Regarding the increase in O&M expenses, APSPDCL
has stated that the reason for the increase is due to making a provision towards future
terminal benefits of the employees in FY2020-21 and APEPDCL replied that the O&M
expenses have increased due to adverse comments in the statutory audit on short
provisioning of admitted Pension and Gratuity Liability that may arise after 2029.
APSPDCL stated that necessary information for getting RE Certificates for the
FY2019-20 and FY 2020-21 were not submitted to the Commission earlier due to
court cases and the same is now being processed. The DISCOMS requested the

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Commission to consider true-up for distribution business as well in view of the

adverse financial situation faced by them due to the covid-19 pandemic during
FY2020-21.

387. FAPCCI and SICMA have stated, among other things, that as per Clause 22 of the
APERC Regulation 4 of 2005, Review of Distribution Licensees’ performance is to be
undertaken after the end of the Control Period. However, the DISOMS have not
provided any justification for filing the true-up of distribution business on an annual
basis and have thus deviated from the MYT Principles. Hence, the objectors requested
the Commission not to allow distribution business items in the true-up for
FY2020-21. Further FAPCCI has stated:

i. That there is a significantly lower dispatch by the DISCOMS from APGENCO

hydel stations in FY2020-21 and no explanation/rationale has been provided
for the same.
ii. That the actual energy loss levels are higher than the normative loss levels
approved by APERC in the tariff order. Hence, the objectors requested the
commission to disallow the power purchase cost of Rs.67.73 Crores
corresponding to the energy loss of 157.53 MU.
iii. That the power purchase quantum stated in the filings is not matching with
the actuals as per the Audited accounts in respect of all DISCOMS.
iv. That DISCOMS claimed Other Costs to the tune of Rs. 200.63 Crores in the
true-up for FY2020-21 against Rs.162.88 Crores approved in the Tariff Order.
That from the Audited Accounts of APEPDCL for FY 2020-21, the objectors
observed that the actual ‘Other Costs’ are Rs.15.14 Crores only as against
APEPDCL’s claim of Rs 123.60 Crores. That APEPDCL has not provided the
details/justification for the claimed amounts and the justification for the
deviation and permissibility for paying such a huge amount. That the
compensation for electrical accidents should not be allowed as part of
ARR/True-up as it promotes inefficiency.
v. That DISCOMS have either understated the NTI (Non-Tariff Income) figures
(APEPDCL) or did not deduct the NTI at all (APSPDCL and APCPDCL) from the
True-up claims. The objectors furnished their workings on NTI.
vi. That there is a mismatch in the amount of revenue claimed by the DISCOMS
and the actuals as per Audited Accounts. The reason for the mismatch is the
inclusion of DISCOM to DISCOM sale.
vii. That the Commission approved Rs 718 Crores from the sale of Renewable
Energy Certificates (REC) for FY 2020-21. Despite being an RE-rich state, the
DISCOMS have failed to register any income from the sale of RECs.

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viii. That subsidy from the GoAP (including the UDAY grant) to the tune of
Rs. 11,175.34 Crores, as per the Audited Accounts, has not been reduced from
the true-up for FY 2020-21. Therefore, the objectors requested the
Commission to reduce the subsidies and grant the True-up/ARR as the same
is consistent with the practices of all the State Commission.
ix. That as per the Audited Accounts of APEPDCL, the Power Purchase Cost
includes Late Payment Surcharge amounting to Rs. 82.72Crores which ought
to be disallowed as it is penal in nature and linked to DISCOMs’ inefficiency.
x. During the public hearing on 25.01.22, FAPCCI has stated that the grants that
have been received by the DISCOMS have not been accounted for in the True-
up
xi. DISCOMS’ Response: The DISCOMS have requested the Commission to
consider true-up for distribution business as well in view of the adverse
financial situation due to the covid-19 pandemic during FY2020-21. They
further stated that Hydropower was completely dispatched as per the
availability furnished by APGENCO. The power purchase quantity for true-
down is arrived at as per clause 12.5 of Regulation 1 of 2014 notified by
APERC. APSPDCL has stated that the power purchase adjustments for FY
2019-20 have been factored in the power purchases of FY 2020-21 which
caused the mismatch. As per APEPDCL, the figure quoted by the objectors
under audit reports is the input energy, not power purchase MU. That the
actual PP quantum as per Annual reports for FY 2020-21 matches with the
figure in the filings. APCPDCL replied similarly as APEPDCL. The DISCOMS
have stated that non-tariff income has been filed as per the annual reports.
APEPDCL and APCPDCL have stated that APSPDCL is supplying its surplus
energy to the remaining two DISCOMs to meet their shortfall. That DISCOM
to DISCOM transactions need to be treated as an adjustment in the power
procurement activity and not as a sale. APSPDCL has stated that the sale of
RE Certificates pertaining to FY 2018-19 is held up due to court cases and the
matter is subjudice. Further, for the subsequent FYs 2019-20 and 2020-21,
necessary information towards getting RE Certificates was not furnished to the
Commission, and the same is now being processed. APEPDCL has stated that
late payment surcharges are being paid as per the terms and conditions of the
PPAs. Therefore, they are part of the PP costs and should be allowed.

388. Sri S.Pratap, APSEBAEEA stated that the Commission disallowed the revenue true-
up of DISCOMS as there is no enabling provision for such true-up as per Regulation
4 of 2005. That DISCOMS are making their best efforts to arrive at the sales and
revenue forecasts but the deviations in sales, revenue, and expenditure are bound to

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happen because of various socioeconomic reasons such as inflation, price changes in

national and international markets, seasonal variations, etc. Hence, he requested the
Commission to allow the revenue true-up as allowed by various SERCs. That except
for the power purchase expenses, the Commission disallowed the remaining expenses
for the 3rd control period. That the variations in expenses pertaining to APTRANSCO
and APSLDC are being determined after the completion of the respective control
periods and the same are being allowed in the tariffs of the next control period. That
the variations in PGCIL and ULDC expenses were not factored either in the DISCOMs’
annual power purchase true-ups or in the Distribution true-ups pertaining to the
third control period.

DISCOMS’ Response: The DISCOMS have stated that they noted the suggestions and
that the matters are under the purview of APERC.

389. Sri B. Tulasidas requested the commission not to allow True-up charges. Sri Ch.
Gangaiah stated that True-up charges should not be levied on consumers.

DISCOMS’ Response: That they have filed true-up charges as per APERC regulation
1 of 2014.

390. Sri Kandergula Venkata Ramana stated that instead of collecting true-up charges at
one go, they should be collected over a period of time. That the true-up charges
included in CC bills would create difficulties for persons residing in rented houses.
Hence, he suggested that steps should be taken to collect additional electricity charges
from time to time like a dynamic billing system in the matter of collecting true-up
charges.

DISCOMS’ Response: APEPDCL has stated that in place of yearly true-up of power
purchase costs, FPPCA on a quarterly basis has been introduced. That it may not be
possible to prepare Dynamic Billing of True-up costs, as there is no way to finalize the
Power Purchase Prices on an immediate basis.

COMMISSION’S VIEW/ANALYSIS AND DECISION

391. True-up or True-down is inevitable in reality. The tariffs are determined as per
estimates and hence they have to be compared with the actuals once they are finalized
as per the audit reports. The relevant regulations applicable for the true-up are
regulation 4 of 2005 and regulation 1 of 2014 and the extracts of the same are shown
in Chapter XIII while dealing with True-up for FY2019-20 and hence the same are not
repeated here for the sake of brevity. As regards the true-up of costs, the regulations
in vogue allow for the passing of variations in costs in respect of power purchases,
uncontrollable items, controllable items having uncontrollable factors on a yearly
basis based on the audited accounts. However, the DISCOMS in their annual filings

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during the Control Period shall present gains and losses for each controllable item of
the Aggregate Revenue Requirement after adjusting for any variations on account of
uncontrollable factors. The gains or losses of controllable items of ARR on account of
factors that are beyond the control of the Distribution Licensee - force majeure - shall
be passed on as an additional charge or rebate in ARR as decided by the Commission.
While granting permission to annual filings for retail supply business for FY2022-23,
the Commission vide proceedings dated 27.11.2021 had directed the DISCOMS to
present the variations in all controllable items along with power purchase cost
variations for FY2020-21. Accordingly, the DISCOMS have presented to the
Commission the variations in all the ARR items applicable for FY2020-21 along with
power purchase cost variations. The summary of the variations in all the items of the
ARR for each DISCOM and the three DISCOMS put together are shown in the table
below:

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393. The Commission is not inclined to accept the variations in revenue and other items of
the ARR as the regulations in vogue do not permit the same and hence decides not to
express its views on the objections and the DISCOMS’ replies relating to these items.
However, the DISCOMS are at liberty to file separate petitions with full details seeking
a remedy for recovery of the excess costs in accordance with the procedure prescribed
by APERC Regulation 4 of 2005 and the direction of the Commission at para no. 109
of the wheeling order dated 15.04.2019, if the actual recovery of revenue through
Distribution Tariffs is less than the actual cost by more than 10 percent. The
Commission, upon examination of these details, may pass an appropriate Order or
show the ways and means to address the issue of the under recovery of the costs.

394. In view of the above, the Commission is inclined to examine only the variations in
power purchase costs for FY2020-21 as detailed in the following paragraphs.

395. To begin with, the power purchase costs filed in the petitions and the power purchase
costs stated in the books of accounts are examined as shown in the table below:

Allowable Power
Power purchase cost
Sl. purchase cost shown
DISCOM shown in audited books
No. in true-up filings for
for FY2019-20 (Cr.)
FY2019-20 (Cr.)

1 EPDCL 9912.85 9912.84

2 SPDCL 10377.58 10297.56

3 APCPDCL 6346.99 6346.64

As could be seen from the above, the power purchase cost claims of the DISCOMS are
less than or at the same level as that stated in the audit books.

396. For prudent check, the Commission has verified the power purchase costs filed by
the DISCOMS as detailed below:

397. The Commission has verified the sales and the power purchase requirement to be
considered for true-up as per the regulation which are shown in the table below:

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Table 17: Power Purchase requirement for FY2020-21

2020-21
S.No. Description
CPDCL EPDCL SPDCL TOTAL

1 Agl sales as per Audit Report (MU) 1930.1 2276.69 6663 10869.79

Agl sales as per Commission order

2 2131.06 2399.41 7703.88 12234.35
(MU)

3 Difference Agl sales (MU) (1-2) -200.96 -122.72 -1040.88 -1364.56

4 Total sales as per Audit Report (MU) 12719.91 20416.44 21460.2 54596.55

5 Total sales as per Tariff order (MU) 14471.92 23332.02 24014.65 61818.59

Total actual sales as per true-up

6 12715.1 20416.44 21460.25 54591.79
filing (MU)

7 Approved losses (%) in RST Order 10.87% 9.28% 10.87% 10.28%

Power purchase on total actual sales

8 14265.79 22504.89 24077.47 60848.16
at the approved loss

Actual power purchase as per the

9 14220.84 22445.25 23248.27 59914.36
true-up filings

As can be seen from the above table, the total actual agricultural sales are less than
that approved. Similarly, the total sales are also significantly less than the approved
sales due to the COVID-19 pandemic. The actual quantum of power purchase for each
DISCOM as per the filings is less than the quantum of power purchase arrived at by
grossing up the actual sales with the approved losses. Hence, the Commission accepts
the power purchase quantum filed by the DISCOMS in accordance with the
regulation in order to pass on the benefit of the corresponding reduction in power
purchase costs to the consumers.

398. Accordingly, the source wise variations in despatches, power purchase costs
corresponding to the above power purchase quantum are examined for the three
DISCOMs put together as they made combined purchases. The power purchase costs
DISCOM wise are shown in the annexures-7,8&9. The summary of the details for the
three DISCOMS put together is shown in the table below:

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above the norms during FY2020-21. Hence, the question of the reduction of fixed cost
payments to these stations does not arise. However, the cumulative availability details
of APPDCL were not furnished by the DISCOMS. Hence, they are directed to submit
these details along with the fixed costs paid to APPDCL in the FPPCA proposals for
the fourth quarter of FY2021-22. In respect of the CGS, as the CERC has not issued
tariff orders for FY 2019-24 for any of the CGS (except Ramagundam Stage III) that
are supplying power to the DISCOMS, the licensees are directed to include all the
variations related to power purchase costs in respect of CGS in the next immediate
FPPCA proposals after CERC issues the tariff orders for these stations. During the
FY 2020-21, the DISCOMs considered provisional tariff rates of Rs.2.43/unit and
Rs.2.44/unit for making payments to most of the wind and solar power plants based
on the interim orders of the Hon’ble High Court of AP. However, the Hon’ble High court
vide judgement dated 15.03.2022 directed the DISCOMS to make payments to these
plants as per the PPA rates. Therefore, the Commission has considered the PPA rates
for these plants while arriving at the true-down amounts. The Commission accepts
the per unit weighted average price of power from the market filed by the DISCOMS
as the same is well below the per unit ceiling price fixed in the RST Order for
FY2020-21. The inter DISCOM transactions have been verified and found to be in
order. The DISCOMS have also passed on adjustment of FY2019-20 in the
FY2020-21 and the same was verified and found that there is a discrepancy in the
variation filed by APCPDCL as shown in the table below.

Table 19: FY2019-20 adjustments in FY2020-21 - APCPDCL

Station Energy Purchased Variable Cost

Station
No. (MU) (Rs Crs)
AP GENCO SOLAR 400MW 2019-
1 286.79 83.47
20 COST
NVVNL BUNDLED COAL 2019-
2 5.80 7.27
20
NP KUNTA ULTRA AND SBG
3 62.28 31.21
2019-20
D To D Cost Adjustment for
4 (338.07) -186.63
2019-20
5 SECI 2019-20 104.71 47.12

7 Others 2019-20 Total 121.51 (17.56)

8 As per filings 121.52 148.04

9 Difference 0.01 165.60

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On interaction with APCPDCL, it has stated that the claim is as per the audit report
and that the same will be examined once again with reference to the details furnished
by the APPCC. In view of the huge true-down of power purchase costs for FY2020-21
and passing on of a significant portion of these costs by the DISCOMS to the
consumers on a provisional basis during FY 2021-22, besides the above amount being
small, it is not adjusted in the ARR for FY 2022-23 in order to provide one more
opportunity to APCPDCL to justify its claim in this regard. Accordingly, the
Commission directs APCPDCL to include the full details of the above variations along
with the auditor certificate in the FPPCA proposal for the fourth quarter for FY2021-
22 for taking an appropriate decision by the Commission in this regard.

As directed in the earlier chapter, the DISCOMS shall state the station wise details of
power purchase costs with relevant notes in the audit books from FY2022-23
onwards. The backing down costs were already subsumed in the fixed cost payments
to the generators and the matter was fully discussed in Chapter XIII.

As regards the RECs, APSPDCL may file an appropriate petition before the
Commission to get these certificates as per its eligibility in view of the APTEL judgment
and upon such filing, the Commission will pass an appropriate order after considering
the views of all the stakeholders.

As regards the grants received from any agency, the Commission will examine the
same at the time of true-up for retail supply business for the 4th Control period as
and when the DISCOM files such petitions after completion of the control period.

Accordingly, the power purchase true down as approved by the Commission for
FY2020-21 is shown in the table below:

Table 20 : Power Purchase Cost True-down for FY2020-21

Total for
Sl.
Item APSPDCL APEPDCL APCPDCL three
No.
DISCOMS

PP cost True-
1 -2239.45 -1685.25 -864.33 -4789.03
downFY2020-21 (Cr.)

Provisional amount
2 already Trued down in -1370 -1515.99 -486.43 -3372.42
FY2021-22 RST Order

Net Power Purchase

3=(1)-(2) -869.45 -169.26 -377.90 -1416.61
Cost true-down

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The above true down amounts are considered in the ARR to be approved for
FY2022-23 in Chapter V of this order. The power purchase costs for each station and
DISCOM wise are shown in the Annexures 7, 8 & 9.

As shown in the earlier paragraph in this chapter, the agricultural sales are less than
the quantum that was approved in the RST Order for FY2020-21. Accordingly, the
DISCOMS have to return the subsidy amounts to the GoAP corresponding to the said
reduction in sales. The details of the subsidy amounts to be returned to the
Government by the DISCOMS are shown in the table below:

Table 21: Subsidy to be returned to the GoAP for FY2020-21

FY 2020-21 CPDCL EPDCL SPDCL Total

Agl sales as per the Audit Reports
(MU) 1930.1 2276.69 6663 10869.79
Agl sales approved in the
Commission’s order (MU) 2131.06 2399.41 7703.88 12234.35
Difference in sales 200.96 122.72 1040.88 1364.56
Rate per unit(Rs/unit) 6.88 6.58 6.88
Subsidy amounts to be returned to
the GoAP (Rs.Cr.) 138.26 80.75 716.13 935.14

The above amounts that are to be returned to the GoAP have been considered while
arriving at the final revenue gap for FY2022-23 in Chapter VII of this order.

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CHAPTER- XV
Determination of the True-up for Distribution Business for
3rd Control Period (FY2014-15 to FY 2018-19)
O.P.Nos.34 & 41 of 2020

In the matter of Determination of the True-up for Distribution Business for

3rd Control Period (FY2014-15 to FY2018-19)

in

O.P.No.34 of 2020
Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL)

and

O.P.No.41 of 2020
Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL)

Introduction

399. In this Chapter, the Commission proposes to deal with the True-up of Distribution
Business for the 3rd Control Period (FY2014-15 to FY2018-19) of APSPDCL and
APEPDCL based on their filings.

400. The Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL)
and the Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL)
have filed petitions for true-up of their Distribution Businesses for the 3rd control
period on 15.06.2020 & 14.09.2020 respectively. The petitions of APSPDCL and
APEPDCL (In short “the DISCOMs”) were taken on the records of the Commission on
02.09.2020 & 28.09.2020 as O.P.No. 34 of 2020 and O.P.No. 41 of 2020 respectively.

401. Separate Public Notices along with the copies of the respective petitions were placed
on the website of the Commission inviting views/objections/suggestions from the
interested parties/stakeholders. Further, it was informed in the Public Notices that
O.P.No.34 of 2020 & O.P.No.41 of 2020 will be taken up for public hearing at 11.00
A.M. on 21.10.2020 and 04.11.2020 respectively through the web and any interested
person/organization desirous of being heard in person, may appear before the
Commission on the said dates of the public hearings. However, despite the placing of
Public Notice on the website of the Commission, no objections were received in respect
of O.P.No.34 of 2020 by the date of the first public hearing on 21.10.2020. Therefore,
the Commission has provided one more opportunity to the stakeholders for submitting

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their objections and accordingly adjourned the public hearing to 02.12.2020. In

response, two objectors viz., Sri M. Venugopala Rao and Sri M.Thimma Reddy filed
their views/suggestions/objections on both of the above petitions. O.P.No.34 of 2020
was finally heard on 27.01.2021 and O.P.No.41 of 2020 on 07.07.2021. As both the
O.Ps involved identical issues, they were disposed of by the Commission by a common
order dated 27.08.2021. A few consumers have assailed the validity of the True-up
orders before the Hon’ble High Court of A.P. inter alia on the ground that the
Commission has not issued notice through publication in newspapers as envisaged
under Clause 13(5) of the A.P. Electricity Regulatory Commission (Conduct of
Business) Regulation 1999. In the said context, the Commission has exercised its
power of suo-motu review under Section 94(1)(f) of the Electricity Act 2003 r/w.
Clause 49(1) of the APERC (Conduct of Business) Regulation 1999. On instructions
from the learned Advocate General through an email to the Commission Secretary to
the effect that the DISCOMs have no objection to this Commission suo-motu recalling
the order and rehearing the matters after the publication of the same as per the extant
Regulations, and to redress the grievances of the consumers and to put at rest the
controversy on the aspect of correctness or otherwise of the procedure followed by it,
the Commission has decided to recall the order dated 27.08.2021 in O.P. Nos. 34 and
41 of 2020 and hear the Petitions de novo after the publication of notices in the
newspapers. Accordingly, the order dated 27.08.2021 was recalled, and the O.P. Nos.
34 and 41 of 2020 were restored to file for a de novo hearing.

402. Post recalling of its earlier order, the Commission vide letter dated 06.10.2021 has
directed APSPDCL & APEPDCL to publish notifications in newspapers to inform the
public about their filing and the final public hearing date of 19.10.2021, and to invite
views/objections/suggestions on the filings. In compliance with the directions of the
Commission, the DISCOMs have published notifications in one (1) Telugu daily
newspaper (in ‘Sakshi’ on 08.10.2021) and in one (1) English daily newspaper (in
“DECCAN CHRONICLE” on 08.10.2021) - (Annexure-), informing the
public about its filings and the date of final hearing through the web along with other
relevant details. It was also informed in the notification that all the interested
persons/associations/stakeholders/objectors may submit their written views/
objections/suggestions in respect of the said filings before the date of the public
hearing and those who want to be heard in person/through their authorized
representatives may appear before the Commission on the said date of the public
hearing through the web. Accordingly, the petitions came up for hearing through the
web on 19.10.2021.

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403. Sri P. Shiva Rao, learned Standing Counsel for the utilities and (i) Sri. M. Venugopala
Rao, Senior Journalist; (ii) Sri. Ch. Babu Rao, CPI (M); (iii) Sri. Shreekanth Vijay
Dhuri, representing FAPCCI; (iv) Sri. K. Gopal Choudary, Advocate representing AP
Textile Manufacturers Association & AP Ferro Alloys Producers Association; (v) Ms.
Anannya Ghosh, Advocate representing M/s. ArcelorMittal Nippon Steel India Ltd; (vi)
Sri. Yella Saibabu; (vii) Rajmohan A.G; (viii) Sri. Alladi Ravinder, Advocate (ix) Sri.
Rajesh Gutta; (x) Sri. Shanmuga Mondelez; (xi) Sri. Potluri Bhaskar Rao representing
AP Chambers & Industries Federation; (xii) Sri. Vijaya Gopala Reddy; (xiii) Sri.
Arekapudi Chowdary; (xiv) Sri. Challa Gunaranjan, Advocate representing M/s. Rain
Cements Ltd and 72 other objectors were present at the web hearing on 19.10.2021
and submitted their respective views/suggestions/objections. Sri P. Shiva Rao
Standing counsel for the petitioners has requested the permission of the Commission
to submit his responses to the submissions made by the learned Counsel / Objectors
by 26-10-2021. The Commission gave him permission to file responses by 26.10.21,
posted the matter for further hearing on 01.11.2021.

404. During the web hearing on 01.11.2021, (i) Sri. P.S. Raman, Senior Advocate; (ii) Sri.
Pattabhi Raghuram, Senior Advocate; (iii) Sri. M. Venugopala Rao, Senior Journalist;
(iv) Sri. Manukonda Upendra Rao, Senior Advocate; (v) Ms. Anannya Ghosh,
Advocate; (vi) Sri. K. Gopal Choudary, Advocate; (vii) Sri. C. Babu Rao, CPI (M); and
(viii) Sri. T. Sreecharan, Advocate have submitted their views/objections/suggestions.
Thirty others were also present at the web hearing. In reply, Sri P. Shiva Rao, learned
Standing Counsel for the utilities, made his submissions.

405. Accordingly, based on the views/objections/suggestions received afresh on the

petitions and the material available on record, the Commission passes the following
order.

Filings:

406. APSPDCL sought the following reliefs in its petition:

i. to approve the true-up of expenses and revenue for its distribution business for
the 3rd control period (FY2014-15 to FY2018-19);

ii. to approve Rs.3659 Cr. which is the total gap between the actual and approved l
amounts of Net ARR (Gross ARR - Revenue) during the 3rd control period;

iii. to approve Rs. 2230 Cr. as carrying cost for the total revenue gap from the
distribution business for the 3rd control period;

iv. to approve Rs. 5889 Cr. towards total gap including carrying cost for the
distribution business for the 3rd control period.

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407. Similarly, the APEPDCL sought the following reliefs in its petition:

i. to approve the true-up of expenses and revenue for its distribution business for
the 3rd control period (FY2014-15 to FY2018-19);
ii. to approve Rs.825.08 Cr. which is the total gap between the actual and approved
amounts of Net ARR (Gross ARR- Revenue) during the 3rd control period;
iii. to approve Rs.510.42 Cr. as carrying cost for total revenue gap from the
distribution business for the 3rd control period;
iv. to approve Rs.1335.50 Cr. towards total gap including carrying cost for the
distribution business for 3rd control period.

408. A brief summary of the claims in APSPDCL’s petition is as follows:

i. The aggregate loss/gain item-wise, year-wise & total for the 3rd control period and
the aggregate loss of the whole distribution business for the 3rd control period, are
as shown in the table below:
Table 22: APSPDCL - Aggregate Loss/Gain(Rs. Cr.)

ii. The year-wise total loss/gain along with carrying cost and total loss/true-up as
claimed by the APSPDCL for the 3rd control period, are shown in the table below:

Table 23: APSPDCL - Total claim with Carrying Cost (Rs. Cr.)

Year Claim Carrying Cost Total

FY2014-15 749.99 45.00 794.99
FY2015-16 574.67 130.00 704.67
FY2016-17 256.16 195.00 451.16
FY2017-18 350.99 255.00 605.99
FY2018-19 1727.30 411.00 2138.30
FY2019-20 563.00 563.00
FY2020-21 631.00 631.00
Total 3659.12 2230.00 5889.12

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The other important submission made in the petition of APSPDCL is that APERC has
issued the MYT order for the 3rd Control Period on 09.05.2014 in the erstwhile Andhra
Pradesh. Subsequently, as per the Andhra Pradesh Reorganization Act, 2014, (Central
Act No.6 of 2014), two districts, viz, Anantapur and Kurnool which were under the
jurisdiction of Andhra Pradesh Central Power Distribution Company Limited
(APCPDCL) which falls in the State of Telangana, were separated from it and merged
into the Southern Power Distribution Company Limited (APSPDCL). Accordingly, the
proportionate share (17.45 percent of APCPDCL’s ARR & Revenue) was added to the
approved ARR of APSPDCL in the wheeling tariff order for the 3rd control period, and
the expenditure and revenue in respect of the merged two districts have been
considered for arriving at the True-up claims. The computations of APSPDCL are
shown in annexure.

409. Similarly, a brief summary of the claims in APEPDCL’s petition is as follows:

The aggregate loss/gain item-wise, year-wise & total for the 3rd control period, and
the aggregate loss of the whole distribution business for the 3rd control period are as
shown in the table below:
Table 24: APEPDCL - Aggregate Loss/ Gain (Rs. Cr.)

i. The year-wise total loss/gain along with carrying cost and total loss as claimed by
the APEPDCL for the 3rd control period are shown in the table below:

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Table 25: APEPDCL - Total claim with Carrying Cost (Rs. Cr.)

Year Claim Carrying Cost Total

FY2014-15 403.85 24.23 428.08

FY2015-16 27.12 53.00 80.12
FY2016-17 -136.34 52.80 -83.54
FY2017-18 -238.34 36.66 -201.68
FY2018-19 768.80 72.88 841.68
FY2019-20 127.76 127.76
FY2020-21 143.09 143.09
Total 825.09 510.42 1335.51

410. The DISCOMs relied upon “Andhra Pradesh Electricity Regulatory Commission (Terms
and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity)
Regulation 2005”,(Regulation 4 of 2005)notified by the Commission in support of their
claims. The relevant clauses of Regulation 4 of 2005 which deal with the true-up of
distribution and retail supply businesses are reproduced below:

Clause 19

“CORRECTIONS FOR “UNCONTROLLABLE” ITEMS AND “CONTROLLABLE” ITEMS AND

SHARING OF GAINS/LOSSES OF “CONTROLLABLE” ITEMS,

The Distribution Licensee shall file its proposals for pass-through as well as sharing of
gains/losses on variations in “uncontrollable” items of ARR and “controllable” items
(indexed to external parameters) in accordance with clause 10 of this Regulation.”

Clause 10

MULTI-YEAR TARIFF FRAMEWORK AND APPROACH

10.1 The multi-year tariff framework shall be based on the following approach, for
calculation of aggregate revenue requirement and expected revenue from tariff and
charges.

10.2 Base Year:- Values for the Base Year of the Control Period will be determined based
on the audited accounts available, best estimate for the relevant years and other factors
considered appropriate by the Commission, and after applying the tests for determining
the controllable or uncontrollable nature of various items. The Commission will normally
not revisit the performance targets even if the targets are fixed on the basis of base values
of un-audited accounts.

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10.3 Targets:- Targets will be set for items that are deemed by the Commission as
“controllable” which constitute operation & maintenance costs, financing costs, and for
distribution losses duly adhering to the Licensees’ Standards of Performance Regulation.
Trajectory for specific variables may be stipulated by the Commission where the
performance of the applicant is sought to be improved upon through incentives and
disincentives.

10.4. Controllable and Uncontrollable items of ARR:- The expenditure of the Distribution
Licensee considered as “controllable” and “uncontrollable” shall be as follows:

Controllable/Uncontrollable ARR Items in Distribution Business

Distribution Business

ARR Item “Controllable”/”Uncontrollable”

Operation & Maintenance expenses Controllable

Return on Capital Employed Controllable

Depreciation Controllable

Taxes on Income Uncontrollable

Non-tariff income Controllable

In addition to the above items, the retail supply business shall include the following:

Controllable/Uncontrollable ARR Items in Retail Supply Business

Retail Supply Business

ARR Item “Controllable”/”Uncontrollable”

Cost of power purchase Uncontrollable

10.5. Pass-through of gains and losses on variations in “uncontrollable” items of ARR:-

The Distribution Licensee shall be eligible to claim variations in “uncontrollable” items in
the ARR for the year succeeding the relevant year of the Control Period depending on the
availability of data as per actuals with respect to effect of uncontrollable items:

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Provided that the Commission shall allow the financing cost on account of the time gap
between the time when the true-up becomes due and when it is actually allowed and the
corrections shall not be normally revisited.

10.6. Sharing of gains and losses on variations in “controllable” items of ARR:

The Distribution Licensee in its annual filings during the Control Period shall present
gains and losses for each controllable item of the Aggregate Revenue Requirement. A
statement of gain and loss against each controllable item will be presented after adjusting
for any variations on account of uncontrollable factors.

10.7. For the purpose of sharing gains and losses with the consumers, only aggregate
gains or losses for the Control Period as a whole will be considered. The Commission will
review the gains and losses for each item of the ARR and make appropriate adjustments
wherever required:

Provided that for the first Control Period, insofar as the gains and losses from the Retail
Supply Business of the Distribution Licensee are concerned, these will be shared with the
consumers on yearly basis.”

10.8 Notwithstanding anything contained in the Regulation, the gains or losses in the
controllable items of ARR on account of factors that are beyond the control of the
Distribution licensees- force majeure- shall be passed on as an additional charge or rebate
in ARR over such period as may be specified in the Order of the Commission.”

Views/objections/suggestions

411. In response to the paper notification, views/objections/suggestions have been

received from many stakeholders (Annexure) afresh. The
views/objections/suggestions and the responses of the DISCOMs are as follows:

412. Sri M. Venugopal Rao & others (Sri Kandarapu Murali, Sri Ch Narasinga Rao, and
Sri Babu Rao) have stated that the DISCOMs have filed the petitions about fifteen
months after the completion of the third control period and submitted abstract data
relating to the increase/decrease of expenditure under various components without
details. The Commission should have directed the DISCOMs to resubmit their
petitions with required information and clarifications and then sought views and
submissions of the interested public. That employee costs constitute about 82% of
O&M cost and over the years, employees' expenses have continued to increase by
leaps and bounds. Therefore, they requested the Commission to determine
permissible extents of employee costs. That the Repair & Maintenance (R &M)
expenses of both the DISCOMs have increased substantially and are not prudent or

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permissible and not commensurate with Gross Fixed Assets. That the increase in A &
G expenses is disproportionate to the increase in the number of consumers, DTRs,
line lengths, and substations year-wise. The DISCOMs have to provide the basis and
justification for such an increase. That the DISCOMs have not explained what "other
expenses & miscellaneous losses and write-offs" are. That the veracity and
permissibility of increased regulated rate base claimed by the DISCOMs need to be
examined in the light of the increased ROCE and nil taxes on income. That the
reduction in actual depreciation charges in spite of the substantial addition of gross
fixed assets during the control period is not justified. That as regards the amount
spent on safety measures, the DISCOMs have submitted that there is no separate
head in accounts for these expenses and that the expenditure for these initiatives has
been accounted for in R&M expenses. This approach evades giving a clear picture of
the specific measures taken, expenditure incurred and improvements achieved as a
result of safety measures taken by the DISCOMs. That while the Commission
approved Rs.1.80 crore for other expenditure during the 3rd control period, APSPDCL
has claimed Rs.170.3 crore towards the same. As the reasons for such an increase
have not been explained by APSPDCL, such arbitrary claims should be rejected.
Similarly, EPDCL has claimed Rs.361.81 crore towards the other expenditure. They
sought the status of insurance claims for the expenditure due to the Hudhud and Titli
cyclones and questioned whether such claims for recovering the losses caused due to
the natural calamities from the consumers in the name of other expenditures are
permissible. They also opposed the carrying costs claimed by the DISCOMs and stated
that they should not be imposed on the consumers as it is not their fault. That both
the DISCOMs have not shown the amounts they received from GoAP earlier under the
financial restructuring scheme and later under UDAY. The same need to be examined
and reduced from the true-up claims, if not already done so. That allowing collection
of true-up claims of the DISCOM for a period of five years of control period within a
short period leads to huge burden as true-up of retail supply business for FY 2019-
20 and true-up claims of APTransco for the third control period also are pending
before the commission. That as this situation has arisen due to the commissions and
omissions of state government and the impact of the Covid-19 pandemic, the
Government should come forward to bear the burden of the true-up claims in such a
situation. If not, it is better to taper the collections of the amounts of true-up claims
as the Commission may permit, to lessen the burden of the same on consumers
gradually over a reasonably long period of time. That the MYT system should be
dispensed with and the Commission should direct APTransco and DISCOMs to file
their claims for revenue requirement, determination of tariff, and true-up/true-down
annually in view of the apparent advantages. Sri M. Venugopal Rao has further stated
that there is no justification for the bifurcation of distribution and retail supply

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businesses. That true-up claims do not provide for cross-subsidy and the
Government’s subsidy to the subsidized categories of non-agricultural consumers
under the present arrangement. That several valid objections have been raised by
non-agricultural consumers as allowing true-up claims are leading to conflicts as to
who should bear the burden of true-up claims – whether the consumers who
consumed power during the period for which true-ups are claimed now or the
consumers who are consuming power now in the same dwellings/establishments
under the same service connections. That under the present system of true-up,
allowing collection of the permitted amounts of true-ups on a per-kWh basis equally
from all non-agricultural consumers is leading to giving up on the principles or
parameters being applied by the Commission for working out the cost of service to
each category of consumers for the purpose of determining retail supply tariffs. That
all the issues of conflict will be adjusted in and subsumed under if the true-up charges
are included in annual retail supply tariffs to be determined by the Commission. That
way, the financial interests of the DISCOMs can be taken care of much faster than
what is being allowed under the MYT system. That it will also avoid the need for
repetitive public hearings that have been taking place under true-up claims, thereby
saving the time and energy of the Commission and of those objectors who have been
participating in the public hearings. It will also avoid scope for litigations and other
difficulties that may arise on account of delayed submissions of true-up claims and
resultant orders of the Commission.

DISCOMs’ Response: That the reasons for the increase in employee expenses are
furnished in the petitions. The O&M costs have increased due to the implementation
of Revised Pay Scales, revised pensions with effect from 01.04.2018, and provision
made towards Pension & Gratuity liability as per actuarial valuation for the past
service at revised scales. That the lion's share of R&M Cost is incurred towards
manning of substations. The majority of substations is manned by the outsourced
personnel and their salaries were increased with effect from 01.04.2018, and this
expenditure is considered under the R&M head in the audited reports. Further, the
effect of inflation also needs to be taken into account while considering the increase
in the R&M expenditure. Hence, R&M cost has increased at a higher CAGR than that
of Gross Fixed Assets. That major part of Administration & General expenses was
incurred towards spot billing, payment to private accounting agencies, collection
charges through private collection agencies, TA bills to the employees, professional
fees, etc. Spot billing costs during the year vary based on the spot billing rate and
release of new services. The A&G expenses (CAGR 17.65%) are reasonable when the
CAGRs in respect of DTRs (13.46%), lines, consumers (4.56%), etc., are correlated to
the CAGR in inflation (3.34%). That the various items under Miscellaneous losses and
write-offs are on account of price variations, loss due to the obsolescence of stock,

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loss to fixed assets due to floods, etc. APSPDCL has stated that the higher GFA is due
to the merging of Anantapur and Kurnool circles in APSPDCL as part of the bifurcation
of Andhra Pradesh and schemes such as HVDS. APSPDCL has further stated that it
has incurred losses for all the years of the 3rd control period and hence no taxes. The
DISCOMs have stated that the Depreciation on fixed assets is being charged at MOP’s
rates. That actual depreciation is different from the approved depreciation due to
differences in the class of approved fixed assets and fixed assets added to the network.
They also stated that they spent expenditure towards the procurement of safety
material such as earth discharge rods, rubber gloves, tool kits, pole climbers, LED
torch lights, etc., for the department staff to prevent electrical accidents while carrying
out maintenance works in the field in addition to the many safety measures
undertaken. As regards the other expenditure, APSPDCL has stated that out of the
Rs. 170.3 Crores claimed under other expenditure as per the audited reports, the
balance expenditure of Rs. 168.55 Cr. need to be considered under the A&G head as
this expenditure relates to A&G. The various cost items included under the other
expenditure are - Vehicles’ running expenditure, Vehicles’ hire charges, training
expenses, material handling expenses, material transport charges, consumers’ meet
expenditure, incidental store expenditure, etc. The DISCOMs have stated that under
the UDAY scheme, working capital loans as of 30.09.2015 & FRP Loans were taken
over by the Govt. of A.P. That the CAPEX loans are not covered under the scheme.
Hence, they have not received any support under the scheme towards Distribution
costs. That APEPDCL has incurred losses during all the years of the 3rd control period
except in FY 2017-18. In FY 2017-18, APEPDCL earned a nominal profit of Rs.10.45
Crs and paid a tax of Rs.2.20 Crores. As regards the other expenditure incurred,
APEPDCL has stated that its assets are not insured and hence it has not received any
amounts from insurance companies. However, an amount of Rs.86.82 Crores was
received in FY 2016-17 from the Commissioner, Disaster Management under the
APDRP scheme towards Hudhud cyclone expenditure and it has not received any
amount for the Titli cyclone. The DISCOMs have stated that all other issues raised by
the objectors are under the purview of the Commission.

413. Ameya Batteries & Others (AP Hotels Association, Bhaskar Rao, Bliss Hotel BSN
Estates, Ch A R Sudhakar, East Cost Paints, Fortune Hotel Harsha Liners, Hemadri
Cements, Hotel Nagavalli, Hyundai Kushalava Motors, Indian Tabacco, Jayansree
Pharma, Kalyan Mohmmed Rashid Khan, Kandhari Hotels, Kusalava Finance,
Kushalava International, Lingamaneni, M Convention, M Hotels, MS Hotels, Masineni
Hotels, Metropolitan Hotels, Mini Hotels & Projects, Nallaru Raghava Rao, Pramod
Paints, Sainer Life Science, Sree Balaji Bricks, Sunita Mehta Jain, Talasila Satyam,
Talasila Vinod Kumar, and Vivekananda) have stated that it is highly unmanageable
to pay the true-up charges for the five-year period FY 2014-15 to FY 2018-19 within

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8 months as the majority of MSMEs are still reeling under the economic impact of the
covid pandemic. If the DISCOMs had collected the true-up charges every year during
the last 5 years, the industries would not have been burdened to pay all the pending
true-up charges of the past 5 years within 8 months. That they enter into long-term
agreements with buyers by taking into account the various cost factors. Businesses
have to bear additional costs on account of true-up charges from their own pockets.
It is not genuine to demand to pay additional amounts for the previous years’ orders
from the customers. Once the ARR is passed and the tariff is finalized, ideally, there
should not be a further revision of tariffs. That out of the total true-up amount to be
collected, around 60% is expected to be collected from business establishments of
which more than 95% are in the MSME category. MSMEs are already operating with
limited working capital and the additional burden of true-up charges will further erode
their working capital, severely hampering the cash flows, and the units will fall into
the NPA category impacting their credit ratings. That as per the Electricity Act, the
DISCOMs are supposed to finalize the power tariffs every year with respect to ARR,
but this has not happened and instead they are proposing to collect true-up charges
retrospectively from FY 2014-2019 which is unfair and burdensome for the
consumers. Hence, APERC should direct DISCOMs to include the true-up charges in
the subsequent year’s tariff. That DISCOMs propose to levy true-up charges on
consumers who haven’t had operations and power connection during FY 2014-15 to
2016-17 periods. That it is unfair on the part of DISCOMs to impose the true-up
charges with retrospective effect on the business consumers who had lesser
consumption during the period from FY2014-15 to 2018-19. Hence, they requested
APERC to direct DISCOMs to collect true-up charges from the units for only the actual
connected load of that particular year. That there is no justification for levying
different true-up charges by each DISCOM within the same State. Ideally, there
should be a uniform tariff across the State. That as per the Act, if any consumer is
getting supply at more than 132 kV, there should not be any true-up charges as lines
above 132 kV belong to APTransco and the question of distribution does not arise.

DISCOMs’ Response: That as per Clause 10.7 of APERC Regulation 4 of 2005,

the DISCOMs have filed for true-up of distribution business for the 3rd control period
i.e., from FY2014-15 to FY2018-19 after the end of control period and not on yearly
basis. APSPDCL has stated that the share of the commercial category is 2.87% and
the industrial category is 21.06%. Hence, the contention of the objector that 60% is
expected to be collected from business establishments is incorrect. APEPDCL has
stated that the share of the commercial category is around 8% and the industrial
category share is around 36% while the remaining 56% charges will be collected from
other categories. Out of 36% of industrial category share, only 6% share comes under
MSME services. The GoAP will bear the true-up charges for Agl non-corporate farmers,

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0-200 units consumers of Scheduled Castes & Scheduled Tribes, and Other Backward
Communities who were covered under special subsidy schemes. That the collection of
true-up charges based on actual consumption of a particular year instead of on
current consumption is under the purview of APERC. That the DISCOMs have filed
for the true-up of the distribution business individually. That the true-up charges are
different for each DISCOM based on variations in the actual expenditure compared to
the approved expenditure in respect of items of the distribution business. That as per
Section 14 of the Electricity Act, 2003, distribution of power is to be carried out by
the holder of the license (DISCOM). Even though lines at voltages of 132kV and above
belong to APTransco, the firms/industries/individuals at supply voltages of 132kV
and above are consumers of the DISCOMs, and power is distributed by them only.
The distribution licensee is a single entity for all classes of consumers differentiated
by voltage, the quantity of usage, and the purpose of usage. The entire Aggregate
Revenue Requirement (ARR) of Distribution Licensees is computed and allocated to
different classes of consumers, as per the principles set forth by the Commission. The
Distribution Cost is an ARR line item of the entire DISCOMs and cannot be treated
differently. Hence, consumers at supply voltages of 132kV and above are liable to pay
the true-up charges as well.

414. BSN Estates and others (Sunitha Mehta Jain, Nalluri Raghava Rao, and
A.R.Sudhakar) have stated that true-up charges are not applicable to the consumers
who are using power through Captive Power Plants and PPAs.

APSPDCL’s Response: All consumers who consume power supplied by DISCOMs are
liable to pay the true-up charges.

415. Synergies Casting and 4 others (Adi Shakti Smelters, AP Textiles, Ferro Alloys, and
South India Cements) have stated that the licensees have made the filings pertaining
to the Distribution Business for the 3rd control period in accordance with Clause 19
of Regulation 4 of 2005. However, the licensees in their filings have not made any
proposal or notice of the manner in which the amount claimed and/or allowed is to
be recovered. Hence, the objectors requested the Commission to consider the same
outside the scope of the petitions. That it is not possible to evaluate the claim of the
licensee, as the necessary statements and details as required and contemplated by
the Regulation were missing in the filings. Hence, they requested the Commission to
dismiss the filings of DISCOMs, treating them to be non-compliant with the
requirements of the Regulations. That in the recalled order of the Commission, certain
essential information was obtained by the Commission through emails, etc. Such
information should be made available to the public by uploading the same on the
Commission’s website. That the methodology of Distribution true-up must necessarily
be the same as in the Distribution Tariff Order. That, the only uncontrollable item in

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the Distribution Business is “Taxes on Income”. That as per Clause 10.5 of the
Regulation, the gain/loss as an uncontrollable item shall be a pass-through in the
ARR for the year succeeding the relevant year in the control period when the data of
the actuals become available. Therefore, the Regulation does not contemplate taking
into consideration the aggregate gain/loss for the whole control period at once so far
as uncontrollable items are concerned. Hence, these gains are to be passed through
in the succeeding year’s ARR. That the controllable items as per the Regulation are
(a) O & M expenses, (b) RoCE, (c) Depreciation, and (d) Non-Tariff Income.
“Controllable” means that it is within the control of the licensee and therefore any
losses arising out of such items ought to be borne by the licensee. That, the excess
expenditure on such items has to be allowed subject to uncontrollable force majeure
factors. Barring the Force Majeure cases, all losses on controllable items are to be
borne by the licensees. Further, the share to the licensee in gains ought to be allowed
only if the gain has been due to any identifiable efficiency improvement in the working
of the utility.

That as per clause 19 of the Regulation, the licensees have to file proposals for sharing
of gains/losses but they have failed in doing so. Instead, the approach of licensees
appears to be that all losses on controllable items are also to be passed through. This
approach is contrary to the Regulation. Therefore, the petitions are not in accordance
with the requirements of the Regulation. That R&M expenses are to be allowed only
on a normative basis i.e., at 2.05% of the Opening GFA of each year. That, for the
purpose of computation of R&M expenses, the opening GFA as per the approved
investment plan or the actual opening GFA whichever is low should be considered.
That as per table 3.11 under para 38 of Chapter III of the D&RST order dated
09.05.2014, the DISCOMs shall strictly adhere to the head-wise investment schedule
mentioned in Annexure E while incurring capital investment. That, there is no
explanation or details in the petitions with regard to the deviation from the amounts
of investments approved by the Commission. That it is necessary to ascertain the
gross value of the assets that are no longer in use in each financial year and to remove
such value from the GFA. That for the computation of RRB, the GFA as approved in
the investment plan or the actual GFA whichever is lower should be taken. That, the
working capital component WCi for computation of RoCE should be computed on the
basis of the allowable O&M expenses. That RoCE should be computed in accordance
with submissions made in respect of GFA, RRB, and working capital. That any loss in
RoCE ought not to be allowed as a pass-through to the consumer. Instead, it should
be borne by the licensee alone. Further, if there is a gain in RoCE, the licensee ought
to be declined any share of the gain. That the O & M expenses, such as Employees
Costs, AG Expenses, and the R&M expenses should also be determined in the true-
up on the basis of submissions made in respect of each item. That the depreciation

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figures which have been computed by the licenses are supposed to be in accordance
with the CERC Regulations. Hence, MoP guidelines are inapplicable in the teeth of
specific provisions in the Regulation. That as per clause 17.4, depreciation should be
taken into consideration only from the financial year from which the asset is first put
to use. That, it is not clear whether such a process was followed and what part of the
additions to fixed assets in a financial year were put to use in the same financial year.
Hence, the amount of depreciation cannot be verified or computed, in the absence of
such necessary information. That the depreciation is to be allowed only on the opening
GFA(to the extent the assets have been put to use) or the actual opening GFA(also to
the extent the assets have been put to use) whichever is lower. Any gains on this
account should be passed on to the consumers. That the purchase of safety material
such as earth discharge rods, etc. are normally routine and regular purchase items
within the O&M expenses. That the objective of special appropriation towards safety
has not been served since there is a continuous increase in electrical accidents and
fatalities. The special appropriations in the control period FY 2009-14 were not
utilized. That the licensees diverted routine regular expenditure on safety material
from O&M expenses to special appropriations. Hence, such diversion should not be
permitted. The amounts stated to have been spent ought to be properly considered as
part and parcel of O&M expenses. Therefore, the entire amount of approved special
appropriations ought to be treated as gain and allowed to be passed through to the
consumers. That it seems that there exists a diversion of expenditure from certain
heads to the other heads, the details of which are not clear. Hence, a careful
examination of the same is necessary. That the other expenditure is neither classified
as an uncontrollable nor a controllable item in Clause 10.4. Therefore, these losses
should be entirely transferred to the licensees' accounts. That the Petitions do not
state as to what part of the non-tariff income relates to the distribution business and
what part relates to the retail supply business. Therefore, the licensees should not
claim the losses in respect of non-tariff income. That carrying cost is applicable only
to uncontrollable items as per the provision of clause 10.5. Therefore, in respect of
the Distribution Business, carrying cost is applicable only on income tax. Further,
there is no provision for carrying cost in respect of controllable items. Hence, the claim
of carrying cost on alleged losses in the controllable item is wholly misconceived. That
the ARR be apportioned among 33kV, 11 kV, and LT consumers following the
methodology set out in para 113 of the D&RST Order dated 09.05.2014. That, the
licensees have not given any data or information relevant for such apportionment. In
the absence of such information, the true-up cannot be properly completed, and
therefore the petitions are to be dismissed and/or returned as incomplete. That the
entire approach and content of the petitions are misconceived, casual, and without
necessary details or explanations. The petitions are also not in conformity with the

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Regulation. Hence, the petitions ought to be dismissed or returned to the licensees.

That as per the regulation in vogue, the true-up amounts are supposed to be passed
through in the ARR of the succeeding year(s). Therefore, any determination of the
true-up amount in the present proceedings should not result in additional tariff for
the consumers. That as per the regulation in vogue, the licensee has to present a
statement of gain/loss against each controllable item after adjusting for any variations
on account of uncontrollable factors. That items falling only under Clause 10.8 can
be passed through. That, the licensees have not pleaded or demonstrated by details
or evidence of any force majeure circumstances with respect to any of the losses in
any controllable item.

DISCOMs’ Response: The objective of the licensees in the filing of a true-up petition
is the determination of true-up charges by the Commission and sharing of the same
with the consumers based on the methodology to be specified by the Commission in
its order.

APSPDCL has stated that as per Regulation 4 of 2005, the licensee is required to file
for aggregate gains or losses for the control period for the purpose of sharing
gains/losses with the consumers. Hence, the licensee has filed the variations between
actual and approved expenditure in respect of the items of the distribution business
for sharing of gains/losses with the consumers. Nowhere in the Regulations, it is
specified that the licensee has to file expenditure according to the norms fixed in the
Tariff Order only. Hence, the contention of the objector that the petition should be
dismissed as being vague, bereft of necessary details, and non-compliant with
requirements of the Regulation is incorrect.

APEPDCL has stated that as per Regulation 4 of 2005, the licensee is required to file
for aggregate gains or losses for the control period for the purpose of sharing
gains/losses with the consumers. Assuming without admitting, year-wise filing is
required to be done, it doesn’t prevent or limit the powers of the Commission in the
regulation to make appropriate orders as may be necessary to meet ends of justice.
Hence, the licensee has filed the variations between actual and approved expenditure
in respect of the items of distribution business for sharing of gains/losses with the
consumers at the end of the control period. Nowhere in the Regulations, it is specified
that the licensee has to file expenditure according to the norms fixed in the Tariff
Order only. Hence the contention of the objector that the petition should be dismissed
as being vague, bereft of necessary details, and non-compliant with the requirement
of the Regulations is incorrect. In the instant case, the Commission is very much
empowered to examine the Gains/Losses as controllable or uncontrollable in respect
of the third control period pursuant to clause 24 under Savings. That it is pertinent
to submit that as per clause 24.2, nothing in the regulation shall bar the Commission

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from adopting a procedure in conformity with the Act, a procedure, at variance with
the provisions of the Regulation, if the Commission in view of the special
circumstances of the matters or class of matters and for reasons to be recorded in
writing, deems it necessary or expedient for dealing with such matters or class of
matters. That the DISCOMs have been filing taxes on income for the control period as
a whole as all other items of distribution business are filed at the end of the control
period. The DISCOMs have stated that nowhere in the Regulation it is mentioned that
losses in controllable items are to be borne by the licensee only. There is no specific
provision in Regulation restricting the licensee to claim variations of controllable
items. The contention of the objector that losses in controllable items are to be borne
by the licensee alone is against the objective of conduct of distribution business on
commercial principles as per Section 61 (b) of the Electricity Act, 2003. The DISCOMs
further stated that APERC had issued orders on the true-up of the distribution
business at the end of the 2nd control period only and not on a yearly basis. Hence,
the argument of the objector that only items falling under Clause 10.8 can be passed
through is incorrect. Further, all factors – controllable and uncontrollable factors
leading to the true-up are given in the petition. That as per the Regulation, the
gains/losses in controllable items are to be shared with the consumer, which in effect
means that the gains/losses are to be passed on to the consumers.

APSPDCL has stated that the Commission approves proposed investments in MYT.
However, the contingencies and circumstances that crop up or emerge warrant the
distribution licensee to undertake the additional expenditure than that specified in
MYT. Still, that part of the expenditure is not prohibited to be claimed. In fact, that
additional expenditure can also be claimed and the Commission after a prudent check
about the necessity and requirement of that part of the item or investment of the
items, finds that the item is very much required, then there is no prohibition to grant
true-up for the losses for that particular amount of expenditure. DISCOMs shall
endeavor to adhere to the approved resource plan. But, the variations are bound to
happen in reality when the stages of construction/commissioning are passed by, in
view of the extraneous factors based on technical, legal, statutory, and socio-economic
nature, which could be beyond the control of the utility. Additional investments are
also needed to be undertaken based on essentiality. Hence, the capital expenditure
stated in the Resource Plan or MYT order cannot be strictly confined. The very
objective of true-up is for approval of the additional investments that were reasonably
incurred and allowable after prudence check. Further, in the petition, it was stated
that the employee cost has increased due to the pay revisions and provisions to be
made for terminal benefits for employees as per AS-15 based on the actuarial
valuation report. The pay revisions are effected through the recommendations of the
pay revision committee. The pay scales & pensions were revised with effect from

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01.04.2014 & 01.04.2018. It is statutory compliance to make provisions towards

Pension & Gratuity liability as per Actuarial valuation for the past service at revised
scales. In Compliance with C&AG Audit's comment on the short provisioning of 100%
Pension & Gratuity liability that may arise after 2029, provisions of Rs.1385 Cr
(APSPDCL) and Rs.184.38 Cr. (APEPDCL) were made in FY 2018-19 as per the
actuarial valuation reports. Hence, the actual employee cost filed by the licensees is
to be approved. That the details of DTRs, No of Consumers, and length of lines are
submitted in the true-up petition vide table no.11. Further, the A&G norms do not
factor in the effect of inflation. Hence, the actual A&G expenses are allowable. As
regards the increase in R&M costs & GFA additions, DISCOMs have stated a similar
reply as furnished to other objectors supra. The DISCOMs have stated that retired
assets have been deducted from the GFAs. They have further stated that they have
calculated ROCE in accordance with the regulation and hence the contention of the
objector that any loss of RoCE is not to be allowed as pass through and gains are to
be declined to the licensee is against section 61(b) of the Electricity Act, 2003. As
regards the depreciation, APSPDCL has stated that the depreciation is taken from the
audited reports of the respective year. APEPDCL has stated that the depreciation on
fixed assets is provided under the ‘straight-line method’ up to 90% of the original cost
of assets, at the rates notified by the Ministry of Power. That to maintain consistency,
it has followed the same methodology as adopted in annual accounts & in MYT Filings.
That the Commission approved the depreciation rates historically applied by
APEPDCL, i.e. the rates approved by the Ministry of Power. That the works in progress
will be capitalized once the works are completed and assets are put to use in the
Network. The details of assets that were put to use during the control period are
submitted vide table 14 of the true-up petition. That the DISCOMs have adopted the
depreciation in the audited reports which are based on MOP’s depreciation rates and
also keeping in view the observations of the Commission on depreciation rates in the
Tariff Order for wheeling tariffs for Distribution Business.

As regards, Non-Tariff income, APSPDCL has stated that an amount of Rs.211 Cr.
pertaining to income from the sale of Renewable Energy Certificate is included in the
miscellaneous income for FY 2018-19. The DISCOMs have stated that the non-tariff
income filed in the petition pertains to the non-tariff income from the Distribution
business only. The DISCOMs furnished the same replies on carrying costs as
furnished supra. The DISCOCMS strongly opposed the contention of the objectors
that the petitions are not in -conformity with the regulation. They have stated that no
specific methodology is specified for pass-through of determined true-up in the
Regulations. The data requirement, if any, for the methodology for pass-through will
be submitted, and as such the plea of the petitioner that the petition should be
dismissed/returned on account of the same being in non-conformity with the

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Regulation is not tenable and that by no stretch of the imagination, the petitions filed
by the DISCOMs can be construed as not in conformity with the Regulation as all
details, explanations, as may be required, are filed with the petitions.

That there is no specific mandate in Regulation 4 of 2005 to file year-wise true-up.

That clause 10.7 enables the Commission to grant true-up for the entire control period
as a whole. Therefore, filing of true-up after the control period is not a violation of any
provision of Regulation 4 of 2005. In fact, such filing after the control period is in
consonance with clause 10.7 of Regulation 4 of 2005.

416. Sri Ravi Godey, Vizag Chamber of Commerce and Industry gave suggestions/raised
objections similar to that of other objectors on the collection of true-up charges,
collection of true-up charges from consumers who have enhanced their capacities
recently, and/or who haven't had operations during the period from FY 2014-15 to
FY 2018-19, different true-up charges for each DISCOM, the applicability of true-up
charges on consumers connected at 132 kV and above voltages and survivability of
MSMEs due to the levy of true-up charges, etc.

APEPDCL’s Response: APEPDCL furnished similar replies on the aspects raised by

the objector as furnished to other objectors supra due to the similarity of the
objections.

417. India Cement and 3 others (Brakes India Pvt. Ltd, Rain Cements and Sree Jayajothi
Cements) gave suggestions/raised objections similar to that of other objectors on the
manner of recovery of true-up amounts, apportionment of True-up amounts, the
applicability of true-up charges on consumers connected at 132 kV and above
voltages, lack of necessary details/explanations in the true-up petitions and their
non-conformity with the Regulation, etc.

APSPDCL’s Response: APSPDCL furnished similar replies on the aspects raised by

the objectors as furnished to other objectors supra due to the similarity of the aspects.

418. Sri Challa Gunaranjan, Advocate, representing My Home Industries Private Ltd. gave
suggestions/raised objections similar to that of other objectors on apportioning of
ARR between different voltages, lack of relevant data/information in the petitions for
such apportionment, lack of necessary details/explanations in the true-up petitions
and their non-conformity with the Regulation and the manner of recovery of true-up
amounts, etc.

APEPDCL’s Response: APEPDCL furnished similar replies on the aspects raised by

the objector as furnished to other objectors supra due to similarity of the aspects.

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419. Sri A.G.Rajmohan stated that APSPDCL has incurred loss to the tune of around
Rs.7,000 Crores during the period from FY2014 to FY2019 and the same is being
distributed among the consumers and added in the power bills accordingly. That the
auditing mechanism in vogue should have identified the loss in the first year itself to
take it up for appropriate correction instead of allowing the same to go on for years
and mounting up the loss on consumers. That the DISCOMs are buying the power at
an average cost of Rs.18 from the Market. That power production should be under the
domain of the Public Sector and the purchase of power from private companies should
be need-based only. That the internal and external auditing systems should be
strengthened to avoid such repetitions in the future. As the said loss is not due to
consumers' negligence, the system of mounting true-up charges being collected from
the consumers should be stopped forthwith and the amount collected so far should
be adjusted in the ensuing power bills.

DISCOMs’ Response: APSPDCL stated that the contention of the objector is incorrect.
That the true-up is filed for variations between approved and actuals in respect of
items such as O&M expenses, Depreciation, RoCE, other expenses, and non-tariff
income. The true-up of the distribution business as filed by APSPDCL amounts to
Rs.5889 Crs. including a carrying cost of Rs.2230 Crs. That the amount of true-up
charges to be recovered from the consumers will be subject to the determination by
the APERC.

That the DISCOMs filed the true-up petitions in accordance with Regulation 4 of 2005
after the availability of audited reports for FY 2018-19. Hence, the allegations of
callous attitude and lack of accountability are not correct. That the present petition
is not related to issues concerned with power purchase agreements and hence a
discussion on the same is not relevant here. That the collection of true-up amounts
from the consumers has been stopped forthwith until the redetermination of the true-
up amounts by the APERC. APSPDCL stated that the amounts collected so far would
be adjusted against the bills in November. APEPDCL has stated that the amounts
already collected will be adjusted based on the final order to be given by APERC on
the present petition.

420. AMNSIL has stated that as per the corporate insolvency resolution plan approved by
the committee of creditors under the Insolvency and bankruptcy code 2016 dated
16.12.2019, no person shall be entitled to initiate any Proceedings to enforce any
Claims or continue my proceedings in relation to any Claims in so far as the Claims
relate to the period prior to the Plan Approval Date. The objector requested the
commission to direct APEPDCL not to impose charges, as the AMNSIL is entitled to
be permitted to operate on a “fresh slate” as true-up charges from the period prior to
the effective date, as a matter of law, cannot be imposed on AMNSIL, as the same

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stand waived, extinguished, abated and discharged qua AMNSIL in perpetuity from
the Effective Date in terms of the applicable law read with the SC Judgment.

APEPDCL’s Response: Irrespective of the change in ownership, the consumer under

service connection No. HT VSP-260 is liable to pay the true-up charges as per APERC
directions.

421. AP Chamber of Commerce stated that DISCOMs are insisting on the consumers to
pay the True-up Charges mentioned in their bills. This is not rational, as APERC
recalled its order dated 27.08.21 in O.P. Nos. 34 and 41 of 2020 on 06.10.2021.
Hence, the objector requested APERC to intervene and direct DISCOMs to allow
consumers to pay their electricity bills after deducting the True-up Charges.

APSPDCL’s Response: Consequent to the APERC recalling its order dt.27.08.21 in

OP.No.34 of 2020 on 06.10.21, APSPDCL has withdrawn/adjusted the true-up
charges levied, in the C.C.Bills of Oct’2021.

422. Sri M. Upendra Rao, advocate representing APCC & IF & Sri Sricharan Telaprolu,
advocate representing AP Chambers of Commerce have stated that the true-up
petition by APSPDCL is bereft of statutory compliances mandated under clause 19
r/w clause 10 of Regulation 4 of 2005 and hence not amenable for adjudication by
the Commission. That the claim should be for the True-up of different heads
enumerated in the original Tariff order for the 3’ d Control Period and as such, the
present Petition as filed is beyond the scope of the original Tariff order and is not
maintainable under law. That the true-up Charges if allowed to be effective from the
current Financial Year, would adversely impact the concluded Contracts, landing the
Members of the AP Chambers in a distress scenario in monetary terms in honoring
their Contractual Obligations. That the commission should reject the claim of
APSPDCL, as the same is submitted by the DISCOM long after the completion of the
3rd Control Period and even after the determination of the Aggregate Revenue
Requirement [ARR] for the Financial Years of the fourth Control Period. That the
commission should reject the claim of the Petitioner, as it is in violation of Section
61(d) of the Electricity Act, 2003. Further, there exists a substantial delay in the filings
of the DISCOM. That the commission should reject the claim of the petitioner, as,
under clause 10.5 of Regulation 4 of 2005, the Distribution Licensees shall be eligible
to claim variations in “uncontrollable" items and under Clause 10.6 of regulation in
respect of “Controllable" items. Thus, as the claim of the licensee is barred by
limitation and by virtue of the Operation of Law, the petitioner is prohibited from
raising such claims. That the Commission should reject the claim of the Petitioner
towards True-Up Cost, which is the Total Gap between the Gross ARR and Total
Revenue during the 3rd Control Period. That, the net gap shall be determined only

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after adjudicating and approving the said Value for Electricity utilized on account of
State Policy towards certain subsidized consumers to the Revenue of each Financial
Year. That the DlSCOMs should recover the net Gap excluding the said amount. That
in view of the true-up charges’ impact on the manufacturing cost of a product, any
amount determined towards True-Up should be spread over for a further period of 5
(Five) years to reduce the financial burden on the Consumers. That the delay in raising
the Claim is solely attributable directly to the indolence of the Petitioner, for which
the establishments cannot be saddled with interest while recovering the True-Up
Charges. Hence, such claims shall not be imposed on the consumers. That the per-
unit cost determined towards True-Up can be imposed on the individual
Establishments only on the actual consumption (total units consumed) by them,
Month/Year-wise during the 3rd Control Period. That the impact of pay revisions,
gratuity, provision for pensions should be allowed only after the due approval of the
Commission as part of the regular Tariff order during the relevant year. Hence, these
costs cannot be recovered as True-up. Hence, the projected escalation under the O&M
Head is to be negated. That rather than recovering the true-up charges at once from
consumers, such charges should be recovered in a phased manner from the regular
tariff, without burdening them. That despite the severe impact of Cyclones like ’HUD-
HUD’ and ’TITLI’, the claims of APEPDCL are relatively lower when compared with the
claims of APSPDCL. Hence, the data pertaining to various expenses of the DISCOMs
need to be examined critically. That the proposed true-up charges should be collected
from the ARR of FY 2022-23 only if any amount is supposed to be recovered from the
consumers. That the true-up charges among various voltage levels should be
segregated, as was done while determining the wheeling tariff in the original Tariff
order for the 3rd Control Period. That the Methodologies of True-Up Charges proposed
by APSPDCL and APEPDCL are glaringly different. Hence, the objector suggested that
charges be uniform across DISCOMs.

DISCOMs’ Response: That they filed the true-up petitions in accordance with
Regulation 4 of 2005. That the methodology in the Tariff Order for Distribution
Business for the 3rd control period is specified for wheeling charges in respect of open
access consumers. That the revenue from open access wheeling charges is minuscule.
That the bulk of the distribution cost determined in the Tariff Order is transferred to
the Retail Supply Tariff as wheeling is done for Retail consumers. The methodology
for recovery of determined true-up is under the purview of the APERC. That the period
of recovery is also under the purview of the APERC. That APSPDCL has filed the true-
up petition after the end of the 3rd control period and after the availability of the audited
reports for FY 2018-19 and the petition is not in contravention of Clause No.10 of
Regulation No.4 of 2005. That the contention of the objector that there was an
inordinate delay in filing the true-up claim is untenable. That the objector's argument

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that the claim of the petitioner should be rejected for non-submission of electricity
utilized by the consumers who are provided subsidy and/or free electricity in
pursuance of the policy of State Govt. is not tenable as the methodology of recovery of
determined true-up, is under the purview of APERC. The DISCOMs have furnished a
similar reply as furnished to the other objectors in respect of the pay revisions,
uniform true-up. The DISCOMs have also stated that allowing carrying costs is under
the purview of the Commission.

423. Better Castings have stated that its average unit consumption for the period from
April 2014 to March 2019 is 1,08,828 Units. That it has enhanced its MD to 750KVA
from 9th March 2021. That its present consumption is 1,70,000 units per month,
which is 60,000 units more than that during FY2014-19. Therefore, the true-up
charges on the basis of present consumption are not reasonable. That retrospective
true-up charges are impacting the business costing negatively, as the additional cost
can neither be recovered from the customers nor charged on the existing contracts.
That payment of 5 years of retrospective true-up charges in a short span of 8 months
is impacting the cash flow and pushing the industry into the red zone. That the
DISCOMs’ excess costs of the previous year included in the next year's Tariff Order,
would save the industry from unpleasant surprises and hardships. That non-uniform
True-Up charges across the DISCOMs within the state are unjustified and are creating
disparity within the industry. That the retrospective imposition of true-up charges is
putting the industry of our state at a disadvantage in a competitive world and pushing
the industry to the brink of disaster. Hence, the objector suggested that the true-up
charges should be spread over a period of 24 months which could help the industry
to cope with these charges.

DISCOMs’ Response: The methodology of recovery of true-up charges is under the

purview of APERC. That the true-up petitions were filed in accordance with Regulation
4 of 2005. A similar reply is furnished by the DISCOMs on non-uniform charges
between the DISCOMS as supra.

424. The Chamber of Commerce, Vizianagaram has stated that 60% of true-up
charges proposed to be recovered will be from the commercial establishments. Hence,
the objector requested the government to waive off such charges in view of the
prevailing pandemic situation. That had the DISCOMs collected true-up charges
annually, there would not have been a burden on the consumers in paying these
charges, as the proposed recovery of the true-up amount in a span of 7 months would
be burdensome for the industries in the existing pandemic situation. That the true-
up charges are being levied based on the current capacity of the units without
considering the capacity of the units during the last 5 years. Most of the business
units must have increased their capacities over the years and their capacities would

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have been far less compared to what they are now, but the DISCOMs are levying the
true-up charges based on the current capacities which are unfair and burdensome to
industries. That if the true-up charges are collected in the next 7 months, the
enterprises will suffer heavily on the balance sheet front and may incur losses, which
will affect their credit rating and working capital facilities. Hence, the objector
requested the Commission to waive off the True-up charges

APSPDCL’s Response: APSPDCL has given a similar reply as supra on the share of
true-up charges from commercial establishments. That as per Regulation 4 of 2005,
the true-up shall be at the end of the five-year control period but not yearly. That the
methodology of recovery of true-up charges is under the purview of APERC. That the
true-up charges are payable as per Regulation 4 of 2005 and the need for DISCOMs
to continue the supply of power.

425. FAPCCI made suggestions/raised similar objections, among others, as that of other
objectors on the net ARR, O&M expenses, employee expenses, other expenditure, non-
segregation of retail and distribution accounts in the audited books, etc. They have
requested the Commission to allow for pass-through of only uncontrollable items but
not controllable items as per Regulation, reduce the equivalent depreciation on assets
which have been funded by consumer/user contribution or through any capital
subsidy/grant, etc., share Gains/Losses in controllable items in a fair ratio between
the Distribution Licensee and the Consumer, pass on the portion of Trued-up amount
refundable/recoverable from the Consumers in the prospective ARR, spread the
recovery of uncontrollable items over 5-7 years period to avoid tariff shocks, cap the
depreciation to 90% of capital cost. Further, the objector computed true-down
amounts of Rs. 1049.83 crores (in respect of APSPDCL) and Rs.1080.45 crores (in
respect of APEPDCL) stated to be done as per Regulation and figures in the audited
reports and requested the Commission to consider the same. The objector also stated
that as per Section 62 (4) of the Electricity Act, 2003, tariff may not be amended
frequently more than once in any financial year.

DISCOMs’ Response: All the issues raised are similar to that of other
objectors discussed supra and hence DISCOMs’ furnished similar replies as furnished
to other objectors.

426. Sri Meesala Basavapunnaiah has stated that the DISCOMs in the state of AP are
incurring losses in spite of the collection of unlawful charges and getting huge
subsidies from the government of AP. The objector requested the Commission to
detain true-up charges forever.

DISCOMs’ Response: The purpose of filing true-up for distribution business for the
3rd control period is stated in the petition.

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427. Mohan Spintex has stated that as per the Electricity Act, DISCOMs are supposed to
finalize the power tariffs every year in the month of December for the next financial
year considering the present year's expenses, in the form of ARR to APERC. That
consideration of True-up charges for the financial years 2014 to 2019 in the current
financial year and inclusion in the power bills from Sept 2021 onwards is not justified.
That its service No.VJA3637 supplied at 132 KV voltage level is managed by
APTRANSCO and hence distribution losses do not arise. That as per the Act, for
consumers getting supply at 132 KV or more voltage levels, there should not be any
true-up charges. That any true-up charges should have been accommodated in the
ARR itself and there should not be any further revision in that particular financial
year. That true-up charges for the consumption through APGPCL were also added to
the power bills and it is not desirable to include them while calculating true-up
charges. That the textile industry utilizes more power compared to other
industries. That the tariff is very high and loading further true-up charges will be a
burden to the industry making it uncompetitive in both domestic and international
markets. That it is not fair to levy exorbitant charges in the name of True-up charges
when the Central Government has come out with some special schemes to support
the industry to survive in the form of stimulus packages.

APSPDCL’s Response: APSPDCL stated that it filed the true-up petition in

accordance with Regulation 4 of 2005. APSPDCL furnished the same reply as stated
supra on the applicability of true-up charges for consumers at 132 kV and above
voltage levels. That the objector was a consumer of APSPDCL during the 3rd control
period and consequent to the issue of distribution license to APCPDCL by APERC with
effect from 01.04.2020, the objector has become a consumer of APCPDCL. Therefore,
the consumer may approach APCPDCL regarding the levy of true-up charges on
consumption from APGPCL.

428. Mondelz International has stated that clauses 10.5, 10.6, and 10.7 of the Regulation
require DISCOMs to file true-up petitions on a yearly basis considering the
Controllable and Uncontrollable items/expenses from the previous year. That the
DISCOMs have not been filing true-up of distribution business annually as required
under regulation. That APSPDCL has, in fact, filed the petition seeking approval of
true-up expenses for the entire Control Period, after more than a year post the
completion of the 3rd Control Period without any justification for the delay. That the
true-up burden is being imposed at a time when the consumers are already facing
financial distress because of the impact of the Covid pandemic. The objector requested
the Commission to take steps to reduce the burden like other state Commissions in
the light of the impact of the Covid pandemic. That the employee expenses claimed
are not in consonance with conditions of the National Tariff Policy, 2016 (NTP), that

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uncontrollable costs should be recovered speedily to ensure that future consumers

are not burdened with past costs and that operating parameters in tariffs ought to be
at “normative levels'' only to encourage better operating performance. That the
Commission should direct DISCOMs to provide break up of true-up amounts for
different categories of consumers such as industrial, domestic, agricultural, etc. That
the recovery of the true-up may be spread out over a longer period as opposed to the
8 months proposed in the earlier order to ease out the financial burden on the
consumers.

APSPDCL’s Response: APSPDCL furnished the same reply as stated supra on the
justification for filing a true-up at the end of the control period. That the pay revisions
are effected through the recommendations of the pay revision committee. Further, a
provision of Rs.1385 Crs. was made in FY 2018-19 as per the valuation report
furnished by Global Risk Consultants which was appointed consequent to the
observation of C&AG in the audited report for FY 2017-18 regarding short provision
towards terminal benefits of APSEB origin employees. That in view of the above, the
claim for O&M expenses is allowable. That APSPDCL has filed a true-up on items
pertaining to the distribution business. That it will submit any further information as
directed by APERC and that the period of true-up recovery is under the purview of the
Commission.

429. Sri Surya Prakash Rao has stated that a huge amount of true-up is against the
principles mandated under section 61 of the Act, regulation, and tariff policy. Hence,
he suggested that the Commission may spread the recovery of the admissible true-up
over a 5year period or at least over 30 months, i.e., the remaining period of the control
period
FY2019-24.

430. DISCOMs’ Response: That a decision on the period of recovery is under the purview
of the Commission.

431. TGV SRAAC has stated that the DISCOMs have not filed true-ups within the
scheduled time. That true-up charges will affect the financial strength of the company
as the additional burden was not factored in the agreements. That the Government
has to compensate for the revenue gap of DISCOMs for the needed category of
consumers in view of the Covid-19 pandemic. That the Commission has to ensure
true-up of past expenses on yearly basis duly dispensing with the Multi-Year Tariff
Framework as in the case of Retail supply Business. That in the event of delay in filing
of the true-ups, the Commission must initiate suo-motu proceedings for tariff
determination in accordance with Section 64 of the Act read with clause 8.1 (7) of the
Tariff Policy. That the future pension liabilities of APSEB origin employees can be

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taken into consideration in the future determination of Distribution Business Tariff

instead of present True-up. That the provision for future pension liabilities is not in
accordance with the law and that the Future Pension Liability should be deleted from
True-up charges. That the Commission ought to have determined the permissible
extent of A&G expenses expenditure, as the same are controllable items.

APSPDCL’s Response: That it filed true-up of distribution business for 3rd control
period in accordance with Regulation 4 of 2005 after the end of the control period and
availability of audited accounts for FY 2018-19. That in the audit report for FY 2017-
18, the Controller and Auditor General of India has pointed out a short provision of
liability towards pension & gratuity of APSEB origin employees. Hence, allocations
were made in order to make good the short provision of liability and the same is liable
to be allowed. That the actual employee expenses & A&G expenses are allowable as
pass-through in view of the reasons stated in the petition. That the other issues
raised by the objector are under the purview of the Commission.

432. Lokesh Aqua Products Pvt Ltd. and Sri Balaji Residency have raised similar objections
as other objectors with regard to the true-up charges, recovery period of true-up, and
financial impact on MSMEs with the proposed true-up charges. They requested the
Commission to levy true-up charges based on actual consumption of the consumer
during the control period rather than on the present consumption. That it is not
justifiable to levy true-up charges differently in each DISCOM. That the proposed true-
up charges are not applicable to the consumers who are drawing power at 132 KV
and above voltage levels, as the said voltage networks are being maintained by
APTransco. That it would be difficult for the survival of their businesses if the
commission allows true-up charges.

DISCOMs’ Response: That as per regulation 4 of 2005, variations in controllable

items of ARR (distribution business) of the respective years of control period should
be taken as a whole for the entire control period for sharing of profits or losses with
consumers. That the commission will review the gains and losses for each item of ARR
and make appropriate adjustments wherever required. That levying of true-up charges
based on the actual consumption of the consumer during the control period is under
the purview of the Commission. That each DISCOM filed the Distribution true-up
petition separately for the third control period by taking into consideration variations
in its expenses and revenues from the approved values. As variations in revenues and
expenses vary from DISCOM to DISCOM, the true-up charges are bound to differ for
each DISCOM. The DISCOMs furnished similar replies as stated supra on other
similar issues.

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433. Sri C. Ravindra Kumar and Sri T. Parthasarathy, Prakasa Spectro-Cast Pvt Ltd. have
stated that the levy of true-up charges after 7 years of consumption is not justified.
The DISCOMs have to recover any such adjustments of the relevant year in the
subsequent year. That in view of the prevailing pandemic, it is not justifiable to allow
the recovery of the entire true-up amount within a span of 8 months. Hence, the
objectors requested the Commission to introspect its decision. That the Commission
determines the tariff for each financial year by balancing the DISCOMs’ revenues and
expenses. Hence, the objector questioned the need for huge true-up amounts when
the DISCOMs are taking stringent measures in bill collections by collecting the penal
charges for late payments. That it is not justifiable to levy true-up charges differently
in each DISCOM, as there exists a common tariff among the DISCOMs. Hence, the
objector requested the Commission for the common true-up charges among
DISCOMs. That the commission has to take a comparative view of state government
employees’ pay and allowances with those of electricity employees and pensioners.
The objector questioned the role of the Commission in controlling the said expenses,
as there is a 300% increase in the said expenses over the approved figures. That in
view of the prevailing pandemic, it is not justifiable to allow recovery of the entire true-
up amount. That it is not justifiable to levy the same true-up charges for both the
rural and urban areas when there exists a disparity in the reliability and durability of
supply in both areas, as such processes are against the principles of the constitution.

DISCOMs’ Response: They filed the true-up petitions in accordance with Regulation
4 of 2005. The DISCOMs have furnished a similar reply as supra on justification to
file the true-ups at the end of the control period and on the justification for different
true-ups. That the Power sector is both technical and infrastructural in nature. That
it is not reasonable to compare the pay and allowances of electricity employees with
those of other sectors, in view of the emergency, sensitive, and dangerous nature of
the jobs. In respect of APSPDCL, the expenditure pertaining to the pay and allowances
of employees for the FY 2014-15 is Rs.1813 crores, whereas the expenditure towards
the same for the
FY2018-19 is Rs.3263 crores, an increase of 80% over the FY 2014-15’s figure. In
respect of APEPDCL, the expenditure for the FY 2014-15 is Rs.971.62 crores, for the
FY2018-19, it is Rs.1753 crores, an increase of 80% over the FY 2014-15’s
expenditure. That continuous and uninterrupted supply is being provided by the
DISCOMs in spite of the pandemic. Hence, keeping in view of the finances of DISCOMs
and regulations in vogue, the consumers have to pay the true-up charges as
determined by the commission. The DISCOMs have stated that the other issues raised
by the objector are under the purview of the Commission.

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434. Sri T.Parthasarathy has stated that the DISCOMs are spending on sub-stations only,
as the land for the sub-stations is being provided by the donors and the line charges,
transformers costs, and development charges are being borne by the consumers. The
DISCOMs are treating the said network as their property. That only substation
maintenance expenses should be allowed to the DISCOMs, as they are recovering
entire other expenditures from consumers. That the Commission should not allow the
true-up charges in favor of DISCOMs. Instead, the objector suggested that the
revenues of DISCOMs should be improved by increasing the internal efficiency and
collection of arrears.

APSPDCL’s Response: That it is spending for the expansion of the network for
providing continuous and quality supply to the consumers. That the charges towards
transformers, lines, development charges are being levied as per the regulations of
APERC in vogue.

That the DISCOMs are filing the true-up petitions based on audited operation
expenditures. That they are providing affordable, durable, and continuous supply to
the consumers. That they are striving hard for the recovery of arrears.

435. Ravali Spinners has stated that they are utilizing power in respect of Service
No.ELR505 at 132 kV voltage level and as the asset is managed by APTRANSCO, the
question of distribution losses does not arise. That the true-up of ARR for distribution
business each year is to be allocated among 33 kV, 11 kV, and LT levels as done in
the original tariff determination. That this also implies that true-up of distribution
business ARR is not applicable to consumers connected at 132 kV and above voltage
levels. That any true-up charges should have been accommodated in the ARR itself
and there should not be any further revision in that particular financial year. That
true-up charges for the consumption through APGPCL are also added to the power
bills.

Commission’s views, Analysis and Decision

436. The stakeholders have raised many issues in addition to the objections on item wise
admissibility of claims. One of the objections is on the maintainability of the petitions
on the grounds that they do not include full details and explanations with regard to
the claims. That they are not in accordance with the extant regulations, and there
are delays in the filings which are limited by law. The DISCOMs strongly defended
their petitions on the basis of the various provisions of the Electricity Act, 2003 and
extant regulations. The extant regulations have not specified formats as regards the
gains and losses of the controllable items except for the variations in the power
purchase cost which is an uncontrollable item. However, the DISCOMs have
submitted the gains and losses of all controllable items of Distribution Business with

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all necessary details. They have given full details of O&M expenditure which is 80
percent of the claim. In respect of RoCE (12 percent of ARR) claims, they have also
furnished all the details except the details of full computations. The DISCOMs
furnished all the details requested by the objectors. Therefore, the Commission does
not see merit in the objections raised on the lack of details. Therefore, the petitions
cannot be rejected on the grounds of insufficient data and not meeting the regulatory
requirement. As regards the delay of about 15 months in the submission of the filings
after completion of the control period, the extant regulations do not specify any time
frame for submission of the aggregate gains/losses of controllable items of the
Distribution Business. In fact the DIISCOMs have explained that they filed the
petitions after getting their accounts audited. In the absence of limitation prescribed
by the Regulations, the question of throwing out the petitions on the ground of delay
does not arise. Further, the Hon’ble Supreme court in its judgment dated 06.10.2015
in Civil Appeal Nos. 6036,6061,6138 of 2012,9304 of 2012 and 6835 of 2015 between
AP Power and Coordination Committee and others Vs Lanco Kondapalli Ltd., and
others [(2016) SCC 468] observed that the law of limitation has a limited application
to the proceedings before the Commission, in that it applies only to the
proceedings which are judicial in nature and is not applicable to the proceedings
which are administrative or regulatory in nature. As the present proceedings are of
regulatory nature, the law of limitation does not apply as per the above Hon’ble
Supreme Court judgments. In the absence of application of law of limitation, the
Commission shall examine whether the petitions suffer from laches. In the light of the
explanation offered by the DISCOMS for the time gap, as noted above, the Commission
is satisfied that the petition does not suffer from laches.

437. We shall now consider merits. As per clause 16(i) of APERC Conduct of Business
Regulations, 1999 (Regulation No.2 of 1999), the Commission may, at any time before
passing orders on the matter, require the parties or any one or more of them or any
other person whom the Commission considers appropriate, to produce such
documentary or other evidence as the Commission may consider necessary for the
purpose of enabling it to pass orders. Accordingly, the Commission’s office has
obtained certain relevant information through the emails for determination of the
petitions.

438. The Commission, while examining the item wise claims in detail, would discuss the
relevant objections keeping in mind, the extant clause of the Regulation, in particular,
clause 10 thereof. After determining the admissible aggregate gains/losses of all the
controllable items, the Commission would discuss all the other relevant issues raised
by the stakeholders in detail. Accordingly, the loss/gain against each item of the
ARR & non-tariff income for the distribution business of the DISCOMs as submitted

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an increase in A&G expenses compared to the approved values.

C. The DISCOMs have submitted employees’ expenses and A&G expenses separately in
their petitions. In this regard, it may be noted that while approving the O&M costs in
the wheeling tariff Order for the 3rd control period by the Commission, the employees'
expenses and A&G expenses were grouped together and approved. Accordingly, the
Commission would put the employees' expenses and A&G expenses together for
examination.

D. Before proceeding with the analysis of the Employees and A&G expenses, the
Commission notes that the A&G expenditure indicated in the following table was
submitted by APSPDCL under “other expenditure” head in the petition and the same
was informed to the objectors by APSPDCL while replying to the objections on ‘other
expenditure’. APSPDCL requested the Commission to consider this expenditure under
the A&G expenses head instead of under ‘other expenditure’ head.

Table 28: APSPDCL - A&G Expenses shown under “other expenses” (Rs. Cr.)

A&G Expenses shown under other expenses

S.No. Year
by APSPDCL

1 FY2014-15 27.23
2 FY2015-16 33.87
3 FY2016-17 33.11
4 FY2017-18 35.07
5 FY2018-19 39.27
Total 168.55

The Commission after due verification of the above expenditure item wise, is inclined
to accept the request of the APSPDCL to consider the above expenditure under the
A&G expenses head. Accordingly, the comparative figures on Employees & A&G
expenses, DISCOM wise are indicated in the tables below:

Table 29: APSPDCL - Gross Employees and A&G Expenses (Rs. Cr.)

Percentage of
Expenditure as per
Actual expenditure variation with
Year the Wheeling Tariff
incurred reference to the tariff
Order
order
FY2014-15 1200.34 2030.18 69.13%
FY2015-16 1396.65 1741.17 24.67%
FY2016-17 1577.35 1626.15 3.09%
FY2017-18 1788.52 2037.94 13.95%
FY2018-19 2031.74 3617.85 78.07%
Total 7994.60 11053.29 38.26%

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APEPDCL - Gross Employees and A&G Expenses (Rs. Cr.)

Percentage of
Expenditure as per
Actual expenditure variation with
Year the Wheeling Tariff
incurred reference to the
Order
tariff order

FY2014-15 746.00 1079.38 44.69%

FY2015-16 860.00 936.90 8.94%
FY2016-17 987.00 913.62 -7.43%
FY2017-18 1123.00 953.39 -15.10%
FY2018-19 1283.00 1916.30 49.36%
Total 4999.00 5799.59 16.02%

As could be seen from the above tables, the expenses have exceeded by 38.26 percent
over the approval in respect of APSPDCL and by 16.02 percent over the approval in
respect of APEPDCL for the 3rd control period. The Commission has examined the
audited books of accounts of the DISCOMs for all the years of the 3rd control period
and the figures mentioned in the audited books of accounts and in the petitions, in
respect of employees and A&G expenses are found to be matching.

Many objectors have raised objections to the steep increase in Employees and A&G
expenses. One of the objectors has requested the Commission to determine the
permissible extent of employee costs. In this context, it is relevant to refer to Clause
14 of the “Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions
for Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulation 2005”
which reads as follows:
“ Clause 14 Operation and Maintenance Costs
14.1 Operation and maintenance (O&M) Costs shall comprise the following:
A. Salaries, wages and other employee costs;
B. Administrative and General costs
C. Repairs and Maintenance, and
D. Other miscellaneous expenses, like legal charges, audit fees, lease charges,
rent, rates and taxes, etc.
14.2 The distribution licensee in its filings for the control period shall submit the
consolidated O&M expenses for the base year of the control period, and 2 years
preceding the base year. The O&M expenses for the base year shall be determined
based on the latest audited accounts, best estimates of Distribution Licensee of actual
O&M expenses for relevant years and other factors considered relevant.
The O&M expenses for the base year, if required, will be used for projecting the
expenses for each year of the control period.
14.3 The composite O&M expenses permissible towards revenue requirement for each
year of the control period shall be determined, by using predetermined norms, or
formulae for this purpose. These norms or formulae shall be determined by the

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commission based on distribution licensees submissions in this regard, previous

year’s actual expenses and any other factors considered relevant by the
commission.”
E. In accordance with the above clause of the Regulation, the Commission has fixed
norms in the “wheeling tariff order for the 3rd control period” in respect of employee
expenses and A&G expenses after correlating the Employees and A&G expenses
together to the number of substations, the length of lines, the number of DTRs and
the number of consumers to keep a tab on such expenditure. The details of the
norms fixed DISCOM wise are given below:
APSPDCL: Norms
Particulars FY15 FY16 FY17 FY18 FY19

EC and A&G norm (Rs. Per

3803839 4130818 4485904 4871513 5290269
Substation)

EC and A&G norm per line

7004 7606 8260 8969 9741
(Rs./ckt.km)

EC and A&G norm (Rs. Per DTR) 3142 3413 3706 4024 4370

EC and A&G norm (Rs. Per

289 314 341 370 402
consumer)

APEPDCL: Norms
Particulars FY15 FY16 FY17 FY18 FY19

EC and A&G norm (Rs. Per

5305596 5761667 6256941 6794789 7378870
Substation)

EC and A&G norm per line

11511 12500 13575 14742 16009
(Rs./ckt.km)

EC and A&G norm (Rs. Per DTR) 5143 5586 6066 6587 7153

EC and A&G norm (Rs. Per

258 280 304 330 358
consumer)

F. The Commission has computed the “Employees expenses and A&G expenses” based
on the above approved norms using the actual number of substations, the length of
lines, the number of DTRs, and the number of consumers furnished by the DISCOMs
in their petitions, (for Kurnool and Anantapur circles in APSPDCL, norms of APCPDCL
have been applied which was obtained through email) to examine and compare the
actual expenses with the set norms. The comparisons, DISCOM wise are shown in the
tables below:

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Table 30: APSPDCL - Employees and A&G Expenses (Rs. Cr.)

Expenditure as per Actual Computed

S.
FY the Wheeling Tariff Expenditure expenditure as
No.
order incurred per the norms
1 FY2014-15 1200.34 2030.18 1443.00
2 FY2015-16 1396.65 1741.17 1634.00
3 FY2016-17 1577.35 1626.15 1878.00
4 FY2017-18 1788.52 2037.94 2143.00
5 FY2018-19 2031.74 3617.85 2418.00
Total 7994.60 11053.29 9516.00

Table 31: APEPDCL - Employees and A&G Expenses (Rs. Cr.)

Expenditure as Actual Computed

S.No. FY per the Wheeling Expenditure expenditure as
Tariff order incurred per the norms
1 FY2014-15 746.00 1079.38 700.00
2 FY2015-16 860.00 936.90 812.00
3 FY2016-17 987.00 913.62 907.00
4 FY2017-18 1123.00 953.39 1063.00
5 FY2018-19 1283.00 1916.30 1198.00
Total 4999.00 5799.59 4680.00

As could be seen from the above tables, the actual Employees and A&G expenses have
exceeded the norms by Rs.1537.29 Cr. in respect of APSPDCL and by Rs.1119.59 Cr.
in respect of APEPDCL.
G. The DISCOMs have stated that the main reasons for the increase in employees
expenses are the pay revisions effected from 01.04.2014 and from 01.04.2018. The
point before the Commission is whether to approve the expenditure incurred over and
above the norms, by the DISCOMs in respect of Employees and A&G expenses, and if
so to what extent.

Employees’ expenses and A&G expenses are controllable items. In respect of

controllable items, the losses and gains shall be presented by the Licensees before the
Commission which on examination, whether any uncontrollable factors exist shall
make appropriate adjustments.

For prudent check of the expenditure claimed by the DISCOMs, the Commission, as
a first step, examined the break up provided for the employee expenses by the
DISCOMs in their petitions which are indicated, DISCOM wise in the following tables:

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Table 32: APSPDCL: Employees’ expenses details

S.No. Particulars FY15 FY16 FY17 FY18 FY19

1 Salaries 626 856 857 1,280 1791

Additional Pay/Dearness Allowance

2 158 81 135 0 0
(DA)

3 Other Allowances & Relief 360 297 305 115 209

4 Medical Expenses Reimbursement 10 13 12 9 8

5 Leave Travel Assistance 0.27 0.05 0.03 0.01 0.01

Pension Contribution & Terminal

6 746 352 161 393 1385
Benefits

7 Employees Welfare expenses 3.30 4.50 3.90 2.80 3.30

8 Less: Employees Cost Capitalized (91) (95) (127) (138) (132.79)

Total 1,813 1,508 1,347 1,662 3,263

Table 33: APEPDCL: Employees’ expenses details.

Sr.
Particulars FY15 FY16 FY17 FY18 FY19
No.

1 Salaries 405.70 417.34 422.49 434.39 697.24

Additional Pay/Dearness
2 17.42 37.66 62.55 79.07 17.72
Allowance (DA)
Leave encashment (Incl.
3 Remeasurements of defined 125.22 128.95 70.03 121.93 285.90
employee benefit plans)
Pension Contribution & Terminal
Benefits (Incl. Remeasurements
4 341.76 123.13 134.74 98.60 641.67
of defined employee benefit
plans)

5 Leave Travel Assistance 0.05 0.09 0.15 0.03 0.04

6 Employees Welfare expenses 21.48 24.64 27.08 28.64 39.36

Medical Expenses
7 14.32 15.09 15.62 14.03 14.89
Reimbursement
8 Other Allowances & Relief 77.28 94.82 90.01 94.63 124.71

9 Employees Cost Capitalized (31.61) (51.67) (50.64) (76.04) (68.14)

10 Grand Total 971.62 790.06 772.03 795.30 1753.38

As could be seen from the above tables, the employees' expenses increased
significantly in FY 2019 for both the DISCOMs. The reasons stated by the DISCOMs
in the petitions for such a significant increase are , the pay revision and provision
made towards pension and terminal benefits of the employees. Therefore, the
Commission’s office obtained certified information from the DISCOMs through the

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emails to examine the provisions made towards pension and terminal benefits of the
employees. The Commission has observed the following from the certified information
provided by the DSICOMs towards pension liabilities of APSEB origin employees.

Table 34: APSPDCL: Pension provision of APSEB origin employees (Rs.Cr.)

S. Actual fund Provision

FY Pension Claim
No. transferred made

1 FY2014-15 745.96 199.16 546.8

2 FY2015-16 352.38 202.63 149.75

3 FY2016-17 160.92 410.4 -249.48

4 FY2017-18 392.6 378.56 14.04

5 FY2018-19 1389.49 362.57 1026.92

6 Total 3041.35 1553.32 1488.03

Table 35: APEPDCL: Pension provision of APSEB origin employees (Rs.Cr.)

Actual transferred Provision

S.No. FY Pension claim
to trust made

1 FY2014-16 341.66 131.32 210.34

2 FY2015-16 123.04 27 96.04

3 FY2016-17 134.67 163.29 -28.62

4 FY2017-18 98.45 324.61 -226.16

5 FY2018-19 641.67 289.66 352.01

6 Total 1339.49 935.88 403.61

As could be seen from the above tables, APSPDCL has made a provision for
Rs.1488.03 Cr. out of the total pension liability claim of Rs.3041.35 Cr. and, APEPDCL
has made a provision for Rs.403.61 Cr. out of the total pension liability claim of
Rs.1339.49 Cr. for the control period. It is also observed that the provisions made
by the DISCOMs in FY19 are significant.

H. APEPDCL, in addition to the above liability, has made a provision for future liability
towards Earned Leave Encashment of the existing employees stated to be based on
Indian Accounting standards and actuarial reports. The details of the provision are
given in the table below:

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Table 36: APEPDCL: Earned Leave Encashment provisions (Rs.Cr.)

Actual
Encashment Provision
expenditure
S.No. FY leave claim made
incurred
(A) (C) = (A) - (B)
(B)

1 FY2014-15 125.22 28.94 96.28

2 FY2015-16 128.95 40.07 88.88

3 FY2016-17 70.03 43.86 26.17

4 FY2017-18 121.99 24.51 97.48

5 FY2018-19 285.9 48.25 237.65

6 Total 732.09 185.63 546.46

As could be seen from the above table, APEPDCL has made a provision of Rs.546.46
Cr towards Earned Leave Encashment in the employees expenses.

I. Further, some “miscellaneous provisions/losses/write-offs” were noticed under the

“other expenses” head (note no 25) under A&G expenses during all the years of the
control period in the APSPDCL audited books of accounts. The year wise details are
indicated in the following table.
Table 37: APSPDCL - Disallowed expenditure (A&G) (Rs. Cr.)

S.No. FY Write-offs

1 2014-15 9.10

2 2015-16 1.25

3 2016-17 0

4 2017-18 62.93

5 2018-19 24.81

6 Total 98.09

The above table reveals a total amount of Rs.98.99 Cr. was incurred for the 3rd control
period towards “miscellaneous provisions/losses/write-offs” and the same has been
claimed by APSPDCL under A&G expenses in the petition. As regards the write-offs,
the essential details such as transaction wise particulars, the amount involved in
respect of each transaction, etc. have not been furnished in its filings. However,
subsequently, the licensee has furnished the transaction wise particulars through
email to the Commission in support of its claim. But, the claim for “miscellaneous
provisions/losses/write-offs” cannot be allowed under the head A&G expenses, as

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there were no approvals from the Commission for such transactions. Therefore, the
claim by APSPDCL to the extent indicated in the table mentioned above is disallowed
by the Commission.

J. If the pension, leave encashment liabilities, and disallowed expenditure are excluded,
the excess in the actual Employees and A&G expenses over the norms is Rs.169.52
Cr. in respect of APEPDCL and there is no excess over the norms for APSPDCL.
Sl.No Item APSPDCL APEPDCL

1 Employees and A&G expenses in excess of the norms (Rs.Cr.) 1537.29 1119.59

2 Pensions liability provision (Cr.) 1488.03 403.61

3 Leave Encashment provision 0.00 546.46

3 Disallowed A&G expenses (Cr.) 98.09 0.00

4 Net Excess over the norms (Cr.)[(1)-(2)-(3)-(4)] -48.83 169.52

K. From the above, it is clear that the substantial variation in “Employees and
A&G Expenses” is mainly on account of DISCOMs making a provision for future
pension liabilities of the erstwhile APSEB Employees based on actuarial reports. One
of the objectors has stated that the future liabilities of the employees' expenses shall
be disallowed. This plea does not seem tenable for the reasons explained below.

L. The Comptroller & Auditor General’s (C&AG) office letters dated 29.01.2019 &
01.07.2019 addressed to the Principal Secretary to Government, Energy,
Infrastructure & Investment Department, GoAP, and the Secretary to Government,
Energy, Infrastructure & Investment Department, GoAP respectively, have pointed
out that during the audit of the all PSUs for Generation, Transmission, and
Distribution for the financial year 2017-18, it was noticed that the PSUs did not make
a provision of Rs.15,321.10 Cr. for the liabilities mentioned in respect of APSEB origin
employees and thus profit/loss was over/under stated by the said PSUs. The C&AG
pointed out further that in view of the revision of pay scales/pension w.e.f. 1st April
2018, there should be a substantial increase in the liability without which the
accounts of the companies do not reflect the true and correct picture. The C&AG also
pointed out that non-provisioning has a long-term impact on the financial health of
the organization as well as it may adversely affect the interest of the employees who
are in service /retired and they may not get adequate compensation if sufficient funds
are not made available. The observations of the C&AG are also mentioned in the
audited books of accounts of the DISCOMs.

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M. In this regard, it is also pertinent to note the judgment of the Apex Court in West
Bengal Electricity Regulatory Commission Vs. CESC Limited (2002) 8 SCC 715,
wherein it has been held that the employees' cost prudently incurred needs to be
reimbursed to the utility. The Hon’ble APTEL followed the said judgment of the APEX
Court in its Order dated 24.03.2015 in Appeal Nos. 55 of 2003, 77 of 2013, 194 of
2013, 259 of 2012, 63 of 2013, 143 of 2013, 158 of 2013, and 43 of 2014.

N. Therefore, in the light of the above, the Commission is of the opinion that it is legally
imperative for the licensees to make appropriate provision for payment of pension and
retirement benefits and transfer the required amounts to meet this expenditure, to
the appropriate trust. Though the O&M expenses are controllable items, the liability
of payment of pension undoubtedly falls in the realm of uncontrollable
factors. Therefore, the Commission is of the opinion that the additional expenditure
incurred by the licensees under this item is liable to be passed on to the consumers
in toto.
O. We shall next examine whether the expenditure incurred in excess of the norms fixed
deserves to be allowed or not. Norms were fixed based on the actual expenditure
during the base year, i.e, FY2012-13, and projected for the subsequent years of
control period at the inflation rate of 8.60 percent and, therefore, if the actual
expenditure exceeds the norms, it is necessary to consider whether such excess
expenditure is justifiable or not. If the DISCOMs provide proper justification, such
excess expenditure needs to be approved as a pass through. As noted above, the case
of the licensees is that due to two pay revisions in one control period, APEPDCL
incurred the extra liability in excess of the fixed norms to the extent of Rs.169.52 Cr.
excluding the pension and leave encashment liabilities. As in the case of incurring
liability towards pension, this item also deserves to be treated as a controllable item
having uncontrollable factors. Moreover, the excess expenditure is also not very
substantial. Hence, the Commission is of the view that this item also shall be passed
on to the consumer's account.

P. In view of the acceptance of the pension and leave encashment liabilities with regard
to APSEB origin employees and other employees by the Commission as discussed
supra and this liability is shown to have already accrued, full payment appears to
have not been made, apparently due to the employees not having retired so far and
the DISCOMs have to inevitably honour their commitment as and when the employees
retire. Therefore, the Commission directs the DISCOMs to deposit the said
claims in their respective ‘Trusts’ and report compliance to the Commission
within one month from the expiry of the recovery period of the true-up.

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ii. R&M Expenditure

A. The main submissions of the DISCOMs for the increase in R&M expenditure are the
addition of gross fixed assets over and above the approved values and the increase
in salaries for the outsourced employees w.e.f 01.04.2018. The APSPDCL has
requested the Commission to exclude the amount of Rs.25 Cr. shown in R&M
expenses spent on safety measures and treat this under the head “Special
appropriations towards safety measures”. The Commission had approved this
amount over and above the investment approved for R&M in MYT Order. Accordingly,
after due examination of the information in this regard, the Commission has accepted
the request of the APSPDCL. The comparative figures on R&M expenses, DISCOM
wise are given in the following tables.
Table 38: APSPDCL - R&M Expenses (Rs. Cr.)

Percentage of
Expenditure as per
Actual expenditure variation with
S.No. FY the Wheeling Tariff
incurred reference to the
Order
tariff order
1 FY2014-15 176.11 174.06 -1.16%

2 FY2015-16 199.89 260.43 30.29%

3 FY2016-17 218.39 291.70 33.57%

4 FY2017-18 235.77 313.00 32.76%

5 FY2018-19 256.52 471.75 83.90%

Total 1086.68 1510.94 39.04%

Table 39: APEPDCL - R&M Expenses (Rs. Cr.)

Percentage of
Expenditure as per
Actual expenditure variation with
S.No. FY the Wheeling
incurred reference to the
Tariff Order
tariff order

1 FY2014-15 83 67 -19.09%

2 FY2015-16 92 99 8.26%

3 FY2016-17 102 107 5.49%

4 FY2017-18 113 125 10.60%

5 FY2018-19 125 163 30.38%

Total 514 561 9.20%

As could be seen from the above tables, the actual R&M expenses have exceeded the
approvals in wheeling tariff order for the 3rd control period by 39.04% in respect of
APSPDCL and 9.20% in respect of APEPDCL.

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B. The Commission has fixed 2.05 percent of the opening balance of the GFA of the
relevant year as the R&M expense for that year, based on the average of the actual
expenditure incurred. The Commission cross-checked the GFA figures submitted by
the DISCOMs in the petitions with that from the audited annual books and found
them to be matching. Therefore, as per norms, 2.05 percent of GFA is considered as
R&M expense for each year for analysis and comparison. The comparative figures,
DISCOM wise, are given in the following tables.

Table 40: APSPDCL - R&M Expenses as per Norms (Cr.)

Expenditure as per
S. Actual expenditure Expenses as per the
FY the Wheeling Tariff
No. incurred Norms
Order

1 FY2014-15 176.11 174.06 135.00

2 FY2015-16 199.89 260.43 196.00

3 FY2016-17 218.39 291.70 235.00

4 FY2017-18 235.77 313.00 260.00

5 FY2018-19 256.52 471.75 285.00

Total 1086.68 1510.94 1111.00

Table 41: APEPDCL - R&M Expenses as per Norms (Rs.Cr.)

Expenditure as per
S. Actual expenditure Expenses as per
FY the Wheeling
No. incurred the Norms
Tariff Order

1 FY2014-15 83 67 82

2 FY2015-16 92 99 89

3 FY2016-17 102 107 100

4 FY2017-18 113 125 113

5 FY2018-19 125 163 134

Total 514 561 519

As could be seen from the above tables, the actual R&M expenses have exceeded
significantly over the amounts arrived at based on the norms in respect of
APSPDCL whereas there is a marginal increase in respect of APEPDCL. Despite a
significant increase in the salaries of the outsourced employees, the increase in the

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R&M expenses of APEPDCL is marginal whereas, in respect of APSPDCL, the

increase is significant. APSPDCL has not furnished any justification for the increase
in R&M expenses except the reason that significant additions to the Gross Fixed
Assets (GFA) have been made during the control period.

C. Further, on examination of books of accounts, the Commission noticed that APSPDCL

booked the expenditure incurred towards the “Domestic Efficient Lighting
Programme (DELP)” under R&M expenses (note 25 of audited annual books of
accounts). The details are given in the following table.

Table 42: APSPDCL - Disallowed expenditure (R&M) (Rs.Cr.)

DELP Expenditure (part of RSTO)

S.No. FY
included in R&M

1 2014-15 0

2 2015-16 24.17

3 2016-17 52.19

4 2017-18 49.8

5 2018-19 47.54

6 Total 171.9

As could be seen from the above table, the total DELP expenditure booked
by APSPDCL under R&M expenses is Rs.171.90 Cr for the 3rd control period. This
amount was already permitted by the Commission to be recovered under the head
“other costs” as a part of the Aggregate Revenue Requirement (ARR) of Retail Supply
Business every year. APSPDCL, therefore, cannot claim any of the above expenditure
under the R&M expense of its distribution business. Hence, the Commission is not
inclined to allow this expenditure, as it amounts to a double claim. After deducting
this DELP amount of Rs.171.90 Cr. from the R&M expense of Rs.1510.94 Cr. claimed
by APSPDCL, the actual R&M expenses stand at Rs.1339.04 Cr which are more than
the R&M expenses arrived at based on norms by Rs. 228.04 Cr. However, the increase
in R&M expense over the norms is Rs. 42 Cr. only in respect of APEPDCL. The reasons
stated by the DISCOMs in the petitions for the significant increase in the R&M
expenses is due to the significant addition of GFA over that approved in the wheeling
tariff order. However, it is seen from the comparative figures in the tables mentioned

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above, the R&M expenses arrived at based on the actual GFA additions are less than
the actual expenditure.

As the Commission is not satisfied with the reasons furnished by the DISCOMs for
the increase in the R&M expenses over that arrived based on norms and keeping in
view that it is a controllable item of the expenditure and also the objections on the
steep increase over the norms, it is decided to limit the R&M expenditure to the norms
for both the DISCOMs. Accordingly, the expenditure incurred over and above the
norms is not shared with the consumers.

iii. O&M costs approved by the Commission

After taking into account the employees, A&G expenses and R&M expenses approved
as stated above with the capitalisation amounts as per the audit books, the net O&M
expenses approved in the wheeling tariff order, actual claim of the DISOCOMs, and
the Commission’s approval of O&M cost for 3rd control period in this order, DISCOM
wise, are indicated in the tables below:

Table 43: APSPDCL - O&M Expenses approved (Rs. Cr.)

Expenditure as
Actual
per the Approved as Disallowed
expenditure
S. Wheeling Tariff per this order Expenditure
FY Claimed
No. Order
(A) (B) (C) (B-C)

1 FY2014-15 1,315 2,097 2,049 48

2 FY2015-16 1,534 1,889 1,824 65

3 FY2016-17 1,730 1,768 1,712 56

4 FY2017-18 1,945 2,189 2,073 116

5 FY2018-19 2,196 3,933 3,721 212

Total 8,720 11,876 11,379 497

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Table 44: APEPDCL - O&M Expenses approved (Rs. Cr.)

Expenditure as Actual
Approved as Disallowed
per the expenditure
per this order Expenditure
S.No. FY Wheeling Claimed
Tariff Order
(C) (B-C)
(A) (B)

1 FY2014-15 796 1109 1124 -15

2 FY2015-16 918 975 966 10

3 FY2016-17 1050 961 954 7

4 FY2017-18 1194 989 977 12

5 FY2018-19 1361 1999 1969 29

Total 5318 6033 5991 42

Return on capital employed (RoCE)

440. The DISCOMs have stated that RoCE is computed based on the actual RRB as per the
procedure prescribed in Regulation 4 of 2005. They have further stated due to the
changes in the costs of the items used in the formula specified in the Regulation for
computing the RoCE, i.e., the increase in investments and assets additions, O&M
costs, and the additional working capital requirement over the approved figures, have
caused an increase in RoCE over that approved in the wheeling Tariff Order for 3rd
CP. The year wise RoCE claims and for the entire 3rd control period, DISCOM wise
are indicated in the following tables:

Table 45: APSPDCL - Return on Capital Employed (RoCE) (Rs. Cr.)

As per the
S.No. FY Wheeling Actual Claim The loss/gain
Tariff Order

1 FY2014-15 303.12 360.10 56.98

2 FY2015-16 328.25 439.09 110.84

3 FY2016-17 325.09 473.88 148.79

4 FY2017-18 319.84 451.24 131.40

5 FY2018-19 326.32 519.87 193.55

Total 1,602.62 2,244.18 641.56

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Table 46: APEPDCL - Return on Capital Employed (RoCE) (Rs. Cr.)

As per the Wheeling

S.No. FY Actual Claim The loss/gain
Tariff Order

1 FY2014-15 111.31 124.81 13.50

2 FY2015-16 120.86 132.86 12.00

3 FY2016-17 131.93 145.21 13.28

4 FY2017-18 143.11 167.71 24.6

5 FY2018-19 153.92 201.75 47.83

Total 661.13 772.34 111.21

The Commission has examined the procedure adopted by the DISCOMs for computing
the RoCE and all the items used in the computation and found that the same is in
accordance with Regulation 4 of 2005. The DISCOMs excluded written-off amounts
from depreciation and consumer contributions in the computation of RRB as per the
regulation. Further, all the items used in the formula are as per the books of
accounts and the rate of debt is as certified by the auditors which is less than that
approved by the Commission in the MYT order. Therefore, all the objections of the
stakeholders in this regard are taken care of by the Commission. One of the objectors
linked ROCE to tax gains shown by the DISCOMs to which they furnished a
satisfactory reply. Some stakeholders have correlated ROCE with Deprecation. The
Depreciation can be correlated with RoCE to a limited extent only as ROCE depends
on the capital assets added during the control period whereas depreciation depends
on the life of the numerous assets of the DISCOMs which have different useful life
periods and rates of depreciation.

But due to a change in the O&M costs, the working capital will undergo a change from
that adopted by the DISCOMs. Accordingly, the RoCE computed by the Commission,
DISCOM wise is shown in the tables below:

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Table 47: APSPDCL - RoCE Computed by the Commission (Rs. Cr.)

As per Actual Claim ROCE as per

Disallowed
S. Wheeling this Order
FY
No. Tariff Order
(D) = (B)-(C)
(A) (B) (C)

1 FY2014-15 303.12 360.15 359.97 0.18

2 FY2015-16 328.25 439.09 438.33 0.76

3 FY2016-17 325.09 473.88 473.28 0.60

4 FY2017-18 319.84 451.24 450.18 1.06

5 FY2018-19 326.32 519.87 517.97 1.90

Total 1602.62 2,244.23 2239.73 4.50

Table 48: APEPDCL - RoCE Computed by the Commission (Rs. Cr.)

As per
RoCE as per
S. Wheeling Actual Claim Disallowed
FY this order
No. Tariff Order (B) (D) = (B)-(C)
(C)
(A)

1 FY2014-15 111.31 124.81 124.95 -0.14

2 FY2015-16 120.86 132.86 132.77 0.09

3 FY2016-17 131.93 145.21 145.14 0.07

4 FY2017-18 143.11 167.71 167.59 0.12

5 FY2018-19 153.92 201.75 201.48 0.27

Total 661.13 772.34 771.93 0.41

There is excess ROCE over that approved in MYT Order even after re-computation
shown in the tables above. To examine whether to pass on this excess ROCE to the
licensees or to the consumer or to share by them, the Commission has verified the
actual T&D losses against the approved which are shown in the tables below:

Distribution Losses (%)-APSPDCL

S.No Year Approved Actual

1 2014-15 10.52 10.33

2 2015-16 8.75 8.47
3 2016-17 8.57 8.47
4 2017-18 8.52 8.31

5 2018-19 8.18 8.26

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% Distribution loss -APEPDCL

S. No Financial Year Approved Actual

1 2014-15 8.26% 8.45%

2 2015-16 7.48% 6.95%

3 2016-17 7.49% 6.73%

4 2017-18 6.95% 6.70%

5 2018-19 6.49% 6.68%

As can be seen from the above, the actual T&D losses are less than the approved and
the Commission has limited the losses to the approved value wherever it has exceeded
and passed on the benefit of lower T&D losses to the consumers while arriving at the
power purchase requirement and its cost to the consumers while finalizing the tariffs
in RST Orders. The primary investments of the DISCOMs are aimed at network
strengthening for reliability and quality supply and reducing T&D losses. Not allowing
this excess ROCE would discourage the DISCOMs to invest towards the same and the
consumer interests may suffer because of such actions. Therefore, the Commission is
inclined to pass on this excess ROCE to the consumers.

Depreciation:

441. The DISCOMs have stated that they have claimed the depreciation on the actual
assets as per the books of accounts at the rates notified by the Ministry of Power in
accordance with the wheeling tariff Order for 3rd CP. Accordingly, the depreciation
loss/gain year wise and for the total 3rd control period, DISCOM wise are indicated
in the following tables:

Table 49: APSPDCL - Depreciation (Rs. Cr.)

As per the
S.
FY Wheeling Actual Claim The loss/gain
No.
Tariff Order

1 FY2014-15 514.65 586.40 71.75

2 FY2015-16 693.73 716.19 22.46

3 FY2016-17 763.52 783.76 20.24

4 FY2017-18 829.19 720.59 -108.60

5 FY2018-19 907.31 826.77 -80.54

Total 3,708.40 3,633.71 -74.69

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Table 50: APEPDCL - Depreciation (Rs. Cr.)

As per the Wheeling

S.No. FY Actual claim The loss/gain
Tariff Order

1 FY2014-15 273.7 252.42 -21.28

2 FY2015-16 307.81 273.12 -34.69

3 FY2016-17 343.26 305.78 -37.48

4 FY2017-18 384.74 357.35 -27.39

5 FY2018-19 427.51 401.75 -25.76

Total 1737.02 1590.42 -146.6

The Commission has verified the depreciation with reference to books of accounts and
found the same as correct. For the total control period, both DISCOMs have shown
gains. The objectors have stated that the depreciation rates are to be taken as per the
CERC Orders whereas the DISCOMs have taken the rates notified by the Ministry of
Power, GoI. The Commission in the MYT Order, after examination of all the aspects,
adopted the depreciation rates as notified by the MoP in MYT order, and hence the
depreciation rates adopted by the DISCOMs are in accordance with the Commission's
directions. As both the DISCOMs have shown gains, the Commission is inclined to
pass on these 100 percent gains to the consumers.

Taxes on income

442. The DISCOMs have stated that they have not paid any tax as they incurred losses
during the entire control period except for one year in respect of APEPDCL. The gain
on “Taxes on Income” year wise and for the entire 3rd control period, DISCOM wise
are indicated in the following tables:

Table 51: APSPDCL - Taxes on Income (Rs. Cr.)

As per the Wheeling

S.No. FY Actual claim The loss/gain
Tariff Order

1 FY2014-15 28.01 0.00 -28.01

2 FY2015-16 30.33 0.00 -30.33

3 FY2016-17 30.04 0.00 -30.04

4 FY2017-18 29.55 0.00 -29.55

5 FY2018-19 30.15 0.00 -30.15

Total 148.08 0.00 -148.08

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Table 52: APEPDCL - Taxes on Income (Rs. Cr.)

As per the
S.No. FY Wheeling Actual claim The loss/gain
Tariff Order

1 FY2014-15 10.29 0.00 -10.29

2 FY2015-16 11.17 0.00 -11.17

3 FY2016-17 12.19 0.00 -12.19

4 FY2017-18 13.22 2.20 -11.02

5 FY2018-19 14.22 0.00 -14.22

Total 61.09 2.20 -58.89

The Commission has examined the audited books of accounts and found that the
DISCOMs have incurred losses during all the years, except marginal profit earned by
APEPDCL during FY 2017-18. One of the objectors has contended that the gain on
account of taxes should be passed on to the consumers on a yearly basis as per
regulation as it is an uncontrollable item. The objector may note that these are the
savings in the provision by the licensees due to the losses incurred and hence there
is no physical gain. However, for arriving at the aggregate loss/gain of all the
controllable items, as there is no expenditure incurred as approved, it has been shown
as a gain for accounting purposes. Therefore, the Commission is inclined to pass on
these gains in toto to the consumers.

Special appropriations for safety measures:

443. APSPDCL has furnished the auditors’ certificate to show that the amount spent
towards the “Special appropriation for safety measures” year wise has been included
in the R&M expenses. Hence, the Commission has excluded the above amount from
the R&M expenses and included it under the special appropriate head for the purpose
of comparison and admissibility. With the above modification to the filings, the special
appropriate amounts as filed by the licensees for the entire 3rd control period are
shown in the following tables:

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Table 53: APSPDCL - Special Appn. for Safety Measures (Rs. Cr.)

Expenditure as per
Actual expenditure
S.No. FY the Wheeling Tariff The loss/gain
incurred
Order

1 FY2014-15 5.73 4.36 -1.37

2 FY2015-16 5.87 5.18 -0.69
3 FY2016-17 5.87 7.05 1.18
4 FY2017-18 5.87 5.46 -0.41
5 FY2018-19 5.87 8.20 2.33
Total 29.21 30.25 1.04

Table 54: APEPDCL - Special Appn. for Safety Measures (Rs. Cr.)

Expenditure as per
S. Actual expenditure
FY the Wheeling The loss/gain
No. incurred
Tariff Order

1 FY2014-15 5.00 0.00 -5.00

2 FY2015-16 5.00 0.00 -5.00

3 FY2016-17 5.00 0.00 -5.00

4 FY2017-18 5.00 0.00 -5.00

5 FY2018-19 5.00 0.00 -5.00

Total 25.00 0.00 -25.00

The DISCOMs have stated that they are spending sufficient amounts towards safety
measures in the distribution network as directed by the Commission. But they have
not maintained a separate head in books of accounts and included it in R&M
expenses. The objectors have pointed out that the expenditure spent towards safety
measures is part of R&M and therefore the claim under this head is not allowable.
But the Commission has approved this expenditure over and above the R&M
expenditure in MYT order for the 3rd CP and hence the same needs to be examined
with reference to its approvals vs claims by the DISCOMs. The gain shown in the
filings under this head is due to the consideration of this expenditure under the “other
heads'' in the books of accounts by APEPDCL and hence it has not benefited and
whereas APSPDCL’s expenditure has been approved as shown in the table above
though it has marginally exceeded the approval by Rs.1.04 Cr. The small marginal
loss shown by the APSPDCL and the gain shown by the APEPDCL are passed on to
the consumers.

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However, it is noted that the number of electrocutions has been increasing every year
as pointed out by some objectors. The increase in the number of electrical accidents
and electrocutions is a matter of grave concern and it is imperative that the DISCOMs
shall take effective measures to prevent electrical accidents. The DISCOMs shall
ensure safety not only to its employees and workers but also to the public. In this
regard, the licensees are hereby directed that they shall strictly abide by the
directions issued by the Commission in the Retail Supply Tariff Order for
FY2021-22 on safety aspects.

Other expenditure

444. APEPDCL has stated that the increase in other expenditure is due to the Hud-Hud
cyclone in FY15 and Titli cyclone in FY19, whereas APSPDCL has stated that
the expenditure incurred against the items specified under the head “other
expenditure” is Rs.1.78 Cr. only out of Rs.170.33 Cr. claimed as per the audited
reports, and that the balance expenditure of Rs. 168.55 Cr. has been considered
under the A&G head as the items are related to A&G expenses. e.g. Vehicle running
expenditure, Vehicle hire charges, training expenses, material handling expenses,
Material transport charges, consumer meet expenditure, incidental store
expenditure, etc. The Commission, after the due verification, accepts the request of
APSPDCL and includes the same in A&G expenditure as discussed supra. With this
modification to APSPDCL filing, the amounts spent under the “other expenditure”
head, year wise and for the entire 3rd control period, DISCOM wise, are shown in the
following tables:

Table 55: APSPDCL - Other Expenditure (Rs. Cr.)

Expenditure as per
Actual expenditure
S.No. FY the Wheeling Tariff The loss/gain
incurred
Order

1 FY2014-15 0.32 0.12 -0.20

2 FY2015-16 0.37 0.23 -0.14

3 FY2016-17 0.34 0.33 -0.01

4 FY2017-18 0.41 0.33 -0.08

5 FY2018-19 0.34 0.78 0.44

Total 1.78 1.79 0.01

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Table 56: APEPDCL - Other Expenditure (Rs. Cr.)

Expenditure as per
S. Actual expenditure
FY the Wheeling The loss/gain
No. incurred
Tariff Order
1 FY2014-15 0.55 159.85 159.30

2 FY2015-16 0.64 18.39 17.75

3 FY2016-17 0.65 7.04 6.39

4 FY2017-18 0.57 14.50 13.93

5 FY2018-19 0.35 164.79 164.44

Total 2.76 364.57 361.81

The Commission after the examination of books of accounts of APEPDCL, found that
Rs.6.66 Cr. paid towards compensation to the victims of electrical accidents in FY19
was shown under “other expenditure”. The Commission has permitted APEPDCL to
recover the same under “other heads” as a part of ARR for its retail supply business
in Retail Supply Tariff Order for FY19. Hence, APEPDCL cannot claim this expenditure
under distribution business again, as it amounts to claiming the same amount twice.
Hence, this amount is disallowed. Similarly, Rs.86.82 Cr. is shown in books of
accounts under “other expenditure” stated to have been received as a Central
Financial Assistance (CFA) towards Hud Hud cyclone and the same has not been
accounted for in the claim made in the petitions. Also, some write-offs were noticed in
the books of accounts under the head “other expenditure” and the APEPDCL has not
submitted transaction wise details for the same, much less lent any justification for
such write-offs. Hence, the Commission is not inclined to allow this expenditure also.
Accordingly, the disallowed expenditure under “other expenditure” in respect of
APEPDCL is shown in the table below:

APEPDCL:

CFA received/
S. Write-offs in other
FY Expenditure covered in Total
No. Expenditure
RST Order
1 2014-15 0.66 0.66
2 2015-16 1.3 1.3
3 2015-16 13.22 13.22
4 2016-17 5.53 86.82 92.35
5 2017-18 10.25 10.25
6 2018-19 48.68 6.66 55.34

7 Total 79.64 93.48 173.12

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in the Commission’s order dated 26.11.2020 in the matters of true-up of Retail Supply
Business for FY2014-15, FY2016-17, FY2017-18, and FY2018-19. Hence, the same
has been excluded from the filing of APSPDCL while comparing the non-tariff income
with reference to the approval in the MYT Order for the 3rd control period. The
comparison of Non-tariff income, after the modification, is indicated in the following
table.
Table 60: APSPDCL - Non-Tariff Income (Rs. Cr.)

S. Income as per the Actual

FY The loss/gain
No. Wheeling Tariff Order Income

1 FY2014-15 107.35 239.04 131.69

2 FY2015-16 438.99 321.99 -117.00
3 FY2016-17 471.68 393.93 -77.75
4 FY2017-18 506.77 392.99 -113.78
5 FY2018-19 546.82 430.53 -116.29
Total 2071.61 1778.48 -293.13

After the above modification to the SPDCL filing on Non-tariff income, the Commission
has verified the books of accounts and found that there is no separate break-up of
non-tariff income for the distribution and retail supply businesses as pointed out by
some of the objectors. Hence, the information on non-tariff income, as certified by the
statutory auditors, has been obtained from the DISCOMS through emails.

As can be seen from the tables above, APSPDCL showed a loss of Rs.293.13 Cr
whereas APEPDCL showed a gain of Rs.132.38 Cr. Though the Non-Tariff income is a
controllable item, the loss or gain in this item is not under the control of the licensees
due to uncontrollable factors. Hence, the Commission is inclined to pass on the 100
percent gain or loss in this item to the consumers.

The annual audited books of accounts of the DISCOMs have not clearly
segregated the accounts of Retail Supply Business and Distribution Business in
accordance with the regulations. Therefore, the DISCOMs are directed to clearly
segregate the accounts of the Distribution Business and Retail Supply Business
in their annual accounts henceforth i.e., from FY2023-24 without fail in
accordance with the regulatory requirements.

446. In view of the foregoing and after netting off the gains shown by the DISCOMs in some
of the controllable and uncontrollable items of the Distribution Business and the
disallowed expenditure, the year wise losses arrived at by the Commission vis-a-vis
that filed by the DISCOMs in the petitions are indicated in the tables below:

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Commission’s View on other issues raised by the stakeholders

450. After crystallizing the loss amounts item wise for the distribution business for the 3rd
control period in the above manner, the Commission would now like to discuss other
issues raised by the stakeholders before it finalizes the methodology for the recovery
of the true-up amounts from the consumers. The various issues raised by the
stakeholders and Commission’s views on the same are discussed in the following
paragraphs.

451. Contention: Dispense with the MYT system and direct all the licensees for annual
filings along with true-up of the previous year to avoid hefty burdens on the
consumers.

Commission’s View: As per section 86(4) of the Electricity Act, 2003, the Commission
shall be guided by the National Electricity Policy, National Electricity Plan, and
National Tariff Policy published under Section 3 in the discharge of its functions.
Clause 5.11(h) of the national tariff policy reads as below:

“h.Multi Year Tariff

1) Section 61 of the Act states that the Appropriate Commission for determining the
terms and conditions for the determination of tariff shall be guided, inter-alia, by Multi-
Year Tariff (MYT) principles. The framework should feature a five-year control period.
The initial control period may, however, be of 3 year duration for transmission and
distribution if deemed necessary by the Regulatory Commission on account of data
uncertainties and other practical considerations. In cases of lack of reliable data, the
Appropriate Commission may state assumptions in MYT for the first control period and
a fresh control period may be started as and when more reliable data becomes
available.

2) In cases where operations have been much below the norms for many previous years,
the initial starting point in determining the revenue requirement and the improvement
trajectories should be recognized at “relaxed” levels and not the “desired” levels.
Suitable benchmarking studies may be conducted to establish the “desired”
performance standards. Separate studies may be required for each utility to assess the
capital expenditure necessary to meet the minimum service standards.

3) Once the revenue requirements are established at the beginning of the control period,
the Regulatory Commission should focus on regulation of outputs and not the input cost
elements. At the end of the control period, a comprehensive review of performance may
be undertaken.

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4) Uncontrollable costs should be recovered speedily to ensure that future consumers

are not burdened with past costs. Uncontrollable costs would include (but not limited to)
fuel costs, costs on account of inflation, taxes and cess, variations in power purchase
unit costs including on account of adverse natural events.

5) Clear guidelines and regulations on information disclosure may be developed by the

Regulatory Commissions. Section 62 (2) of the Act empowers the Appropriate
Commission to require licensees to furnish separate details, as may be specified in
respect of generation, transmission and distribution for determination of tariff.”

The Commission notified the tariff regulation 4 of 2005 on distribution and retail
supply businesses in accordance with the National Tariff Policy and has been
amending it from time to time to keep it abreast of the changes in the regulatory
environment. Further, this regulation provides for the pass-through of the variations
in the power purchase costs on a quarterly basis and pass-through of variations in
the costs of other uncontrollable items on an annual basis apart from providing for
the periodical review of the Distribution Licensees’ performance during the control
period by the Commission to ensure smooth implementation of the MYT framework.
The said costs account for the bulk of variations in distribution and retail supply
costs. For the aforementioned reasons, there is no need to dispense with the MYT
regulation.

With regard to the suggestion to direct the DISCOMs and APTransco to submit their
true-up/true-down claims annually relating to multi-year tariffs determined by the
Commission, a comprehensive review can be taken up only at the end of the control
period as per National Tariff Policy.

452. Contention: Subsidized consumers under non-agricultural categories are being

deprived of the benefit of subsidy and cross-subsidy under true-up claims of the
Discoms and this anomaly can be rectified if the true-up amounts are included in the
annual ARRs.

Commission’s View: As per the extant regulations, the variations in uncontrollable

items such as power purchase cost which consists of about 70 percent of the ARR is
passed on annually as part of ARR, and accordingly, the Commission included the
power purchase cost variation of FY2019-20 and FY2020-21 in the ARR determined
for FY2022-23. Whereas in respect of the true-up of the distribution business, the
methodology for recovery is not specified explicitly. The true-up exercise is only a
reconciliation of the actual expenditure with reference to the approval as the tariffs
are determined based on the best possible estimations. The principle of cross
subsidization can not be applied to the true-up process as there is no vested right in

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any consumer to demand subsidy from the Government or cross subsidies from other
categories of consumers.

453. Contention: Remove the ambiguity, who should pay true-up, ie, whether the
consumers who consumed power during the period of true-up claims or other
consumers presently consuming power in the same dwelling/establishment under the
same service connection.

Commission’s View: The DISCOMs are having legally binding supply agreements for
all the supply connections and accordingly the registered consumers who entered into
agreements with the licensees are liable to pay the true-up charges, if any.

454. Contention: There is no need for bifurcation of accounts of the Distribution business
and Retail Supply Business as it paves way for privatisation.

Commission’s View: This is only an apprehension of the objectors. irrespective of

the segregation of accounts, the information pertaining to the Distribution and Retail
supply business is available in annual accounts and the extant regulation specifies
clear segregation for easy cross verification by all the stakeholders.

455. Contention: Spread the recovery of the admissible additional expenses over a 5 year
period or at least over the 30 months remaining period of the succeeding control
period 2019-24.

Commission’s View: The Commission would allow the licensee to recover true-up
charges over a reasonable period to avoid hardship to the consumers.

456. Contention: True-up charges shall be collected from the consumers who availed
supply on their actual consumption basis during the 3rd control period but not based
on present connected load and consumption.

Commission’s view: The Commission is in agreement with the above contention and
appropriate direction will be issued in this regard.

457. Contention: There is no justification for allowing different true-up charges in each
DISCOM’s area.

Commission’s view: As stated by the DISCOMs, the cost of supply for each DISCOM
and average revenue realisation per unit are different for each DISCOM. The cost
primarily depends on the sales mix of various categories and power supply
agreements. The variations in cost due to power supply agreements to the greater
extent are nullified due to the DISCOM to DISCOM transaction and collective
operation of the merit order for three DISCOMs together. But the sales mix depends
on geographical and economical conditions that prevail in the supply area of each

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DISCOM which are beyond the control of the DISCOMs.

458. Contention: Once the Distribution Business ARR has been trued-up with so much of
the gains/losses as may be passed through to the consumers, it is necessary that the
ARR be apportioned as between 33kV, 11 kV, and LT following the methodology set
out in para 113 of the Distribution Tariff Order dated 09.05.2014.

Commission’s View: The Commission has to determine the wheeling charges in

respect of the open access consumers as per section 42 of the Electricity Act, 2003,
and accordingly, the wheeling charges were determined at para 113 of the Distribution
wheeling tariff Order dated 09.05.2014 for the 3rd control period. Based on the Retail
Supply Demand of the DISCOMs, the DISCOMs have taken distribution cost into their
retail supply ARR and the present exercise of the true-up is limited to the Distribution
cost incurred by the DISCOMs in its retail supply business for its retail supply
consumers. The true-up is only reconciliation of actuals with reference to the
approvals and not tariff fixing exercise under section 62 of the Electricity Act, 2003.
Hence, the true-up amounts need not be apportioned voltage wise as contended by
the objectors.

459. Contention: The consumers of EHT (132 kV and above) are to be exempted from
Distribution true-up charges as they are not connected to the Distribution network.

Commission’s view: There is a clear distinction between retail supply business and
distribution business and also between the open access consumers and the
consumers availing supply from retail supply from the DISCOMs. The Distribution
part considered under the true-up exercise pertains to the Distribution cost allocated
to the retail supply business of the DISCOMs. This part of the Distribution cost is a
part of ARR and cost of service of all the consumers of the Retail Supply Business and
hence any true-up amount is to be collected from all classes of consumers equitably.
Further, it is also clear that the true-up amounts determined are 100 percent relating
to the employees and A&G expenses in respect of EPDCL after passing gains and 90
percent of the true-up amount relating to the employees and non-tariff income for
APSPDCL. Logically, the variations in employee expenses and A&G employees are to
be shared equally among all the consumers irrespective of their supply voltage.
Further, as can be seen from the break up of non-tariff income statements furnished
by APSPDCL to one of the objectors, its major component is withdrawal from
consumer contribution towards Depreciation on Fixed Assets and miscellaneous
income from all its consumers irrespective of the supply voltage. The consumer
contributions towards fixed assets include the buildings and offices, the metering
equipment supplied to all the categories of the consumers irrespective of their supply
voltage. Furthermore, the transmission losses methodology approved by this

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Commission vide its letter dated 22.08.2011 directed the Transco to consider the
interface point at Transco Substation in respect of EHT connected retail supply
consumers of the DISCOMs for computing Transmission loss. Therefore, the losses
in the EHT line between the Transco Substation and the EHT consumer location are
accounted in the distribution loss of the DISCOMs and which are shared to all the
consumers while grossing up the sales with Distribution sales to arrive at the power
purchase requirement of the consumers of 33 kV and below. Keeping all the above
points in view, the Commission has decided to permit the true-up amount determined
for DISCOMs in this order equitably among all the categories of the consumers
irrespective of their supply voltage.

460. Contention: Sharing of Gains/Losses in a fair ratio between the Distribution Licensee
and the Consumer.

Commission’s view: For the reasons already explained against each controllable item
while determining aggregate loss or gain, the Commission is not inclined to apportion
any part of the loss to the licensees (except disallowing certain amounts of expenditure
in various heads) and is also inclined to pass on gains shown by the licensees 100
percent to the consumers. Moreover, the Commission is also not allowing either
carrying cost or any interest on true-up amounts to be recovered from the consumers
during the recovery period to give relief to the consumers.

461. Contention: Non-submission of variations in un-controllable items yearly is a

violation of Regulations.

Commission’s view: It is true that the DISCOMs are mandated to present gains and
losses for each controllable item of the ARR in their annual filings during the control
period as per clause 10.6 of Regulation 4 of 2005. But, the spirit of the Regulation is
MYT filings in respect of Retail Supply Business also. When the DISCOMs file MYT for
Retail Supply Business, the presentation of gains and losses for each controllable item
of the ARR in their annual filings does not arise. In any event, the failure of the
DISCOMs to comply with the above clause does not bar the Commission from
determining the true-up amounts as per the section 61 (d) of the Electricity Act, 2003
to recover the cost of electricity in a reasonable manner while safeguarding the
consumer interest.

462. Contention: True-Ups for the retrospective period shall not be allowed.
Industries/businesses price their products and services for the immediate financial
year based on the raw material costs including that of the electricity. With the levy of
true-up charges related to the past period, they cannot go back now and collect the
extra expenditure due to the true-up charges from their clients/consumers who
purchased their products/services in the past.

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Commission’s view: The Commission determines the tariffs based on the ARRs and
Revenues estimated and filed by the Licensees. As there are bound to be differences
between the estimates and the actuals, the true-ups for the past periods are
inevitable. Further, the spirit of section 64(2) of the Electricity Act, which permits
true-up of tariff due to variations in the fuel costs pertaining to the past period; is to
allow the true-ups for the past period. Thus, in a true sense true-up is nothing but
the determination of the precise liability of the consumers for the
relevant period. Therefore, the question of retrospective levy does not arise.

463. Contention: For consumption from captive plants and through agreements, there
should be no true-up.

Commission’s view: The true-up charges are levied on the energy drawn from the
DISCOMs only and not on the energy wheeled from the captive power plants and
through open access agreements. Therefore, the contention of the objectors is
misplaced.

Recovery of the true-up amounts

464. Based on the views expressed by the Commission supra while replying to various
issues raised by the objectors, the Commission directs the DISCOMs to collect the
True-up charges from all the categories of consumers as detailed below:

465. Before proposing the recovery methodology, the Distribution cost determined in
respect of APSPDCL has to be apportioned between APCPDCL as it became operational
only from 01.04.2020 separating from APSPDCL. Hence the total true-up amount
determined has been apportioned in the power sharing ratio as approved by the GoAP.
Accordingly, the True-up amounts work out to Rs.2135.60 Cr for APSPDCL and
Rs.1232.56 Cr for APCPDCL, out of the total true-up amount of Rs.3368 Cr.

466. Hence, the total true-up amounts to be recovered from the consumers are Rs.2135.60
Cr, Rs.1232.56 Cr and 609 Cr. for APSPDCL, APCPDCL, and APEPDCL respectively.

467. The Commission has obtained the audited sales (MUs) during the 3rd control period
in respect of each company which are shown in the table below:

S.No Year APSPDCL APCPDCL APEPDCL Total

1 2014-15 16456.06 9905.47 13812.37 40173.90
2 2015-16 17593.07 11119.30 15185.99 43898.36
3 2016-17 19379.67 11354.82 16443.36 47177.86
4 2017-18 19257.18 12077.85 18656.61 49991.64
5 2018-19 22171.30 12717.61 19678.14 54567.05
94857.29 57175.05 83776.47 235808.81

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shall recover the true-up costs in 36 monthly instalments commencing from 01-
08-2022. APEPDCL shall recover the true-up costs in 18 monthly instalments
commencing from 01-08-2022. With a view to spare the consumers of interest
burden, the Commission further directs that the instalment payments shall not
carry any interest.
3. Equal monthly instalments of True-up shall be clearly shown in the CC bills issued
every month.
4. The true-up charges shall not be applicable to the supply connections taken
on/after 01.04.2019.
5. In respect of the service connections which were taken over by the new entities
under the corporate insolvency resolution plan approved by the committee of
creditors under the Insolvency and bankruptcy code 2016 dated 16.12.2019, the
DISCOMs shall act as per law.

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CHAPTER- XVI
True-up of Transmission Business for
3rd Control Period (FY2014-15 to FY2018-19)

In the matter of True-up of Transmission Business for

3rd Control Period (FY2014-15 to FY2018-19)

in

O. P. No 46 of 2020
Transmission Corporation of Andhra Pradesh Ltd. ....
Petitioner

and

Eastern Power Distribution Company of Andhra Pradesh Ltd,

Southern Power Distribution Company of Andhra Pradesh Ltd,
A P Central Power Distribution Corporation Ltd. ….
Respondents

Introduction

471. In this Chapter, the Commission proposes to deal with the True-up of Transmission
Business for the 3rd Control Period (FY2014-15 to FY2018-19) of Transmission
Corporation of Andhra Pradesh Ltd. based on its filing.

472. Transmission Corporation of Andhra Pradesh Ltd. (in short “the APTRANSCO”) has
filed a petition on 12.03.2020 for true-up of its transmission businesses for 3rd
control period (FY2014-15 to FY2018-19). The petition has been taken on the record
of the Commission as O.P.No. 46 of 2020. A public notice along with a copy of the
original petition of the APTRANSCO was placed on the website of the Commission on
20.11.2020 inviting objections/views/suggestions from the stakeholders and
informing them that the web hearing on the petition would be held on 23.12.2020.
APTRANSCO was directed to place a public notice and a copy of the petition on its
website inviting views/objections/suggestions from all the stakeholders on the
petition. During the web based public hearing on 23.12.2020, Sri M. Venugopala Rao,
learned objector has rightly pointed out, that APDISCOMS are necessary and proper
parties to this petition, as they are required to bear the additional liability, if any,
payable under true-up order. Sri P. Shiva Rao agreed to implead all the three
DISCOMS as respondents. Accordingly, the three DISCOMS were served notices by
the Commission fixing the next web hearing date as 24-03-2021. During the public
hearing on 24-03-2021, Smt. Vanaja representing APSPDCL and Sri A. Ravi Kumar,

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Chief General Manager, APEPDCL have submitted that they have no objection for
being impleaded. Accordingly, APEPDCL and APSPDCL were impleaded as
respondents. The representatives of both the DISCOMS have requested time for
submitting their respective responses in the O.P. and accordingly, the next web
hearing was fixed on 23-06-2021 which was subsequently postponed to 30.06.2021
for administrative reasons. Meanwhile, APTRANSCO filed an amendment petition
impleading APSPDCL, APEPDCL, and APCPDCL (in short “the DISCOMS”) and the
DISCOMs have filed their views on the petition by the web hearing date on 30-06-
2021. Subsequent web hearings on the petition were held on 04-08-2021, 22-09-
2021.

473. As the response to the petitions from the public was poor during the above hearings,
the Commission vide letter dated 21-10-2021 has directed APTRANSCO to publish
notifications in newspapers to inform the public about its filing and the final public
hearing date of 24.11.21, and to invite views/objections/suggestions on the filing. In
compliance with the directions of the Commission, APTRANSCO published
notifications in one (1) Telugu daily newspaper (‘Sakshi’ on 28.10.2021) and in one (1)
English daily newspaper (‘Times of India’ on 28.10.2021) - (Annexure-14), informing
the public about its filings and the date of final hearing through the web along with
other relevant details. It was also informed in the notification that all the interested
persons/associations/ stakeholders /objectors may submit their written
views/objections/ suggestions on the said petition before the date of the final public
hearing and those who want to be heard in person/through their authorized
representatives may appear before the Commission on the said date of the public
hearing through the web. Accordingly, the petition came up for final hearing through
the web on 24.11.2021.

474. During the final web hearing on 24.11.2021, Sri Ch. Babu Rao CPI(M), Sri Shreekant
Vijay Dhuri, Sri Shiva Kumar and Sri M. Venugopal Rao, learned objectors, have made
their oral submissions. Sri P. Shiva Rao learned standing counsel for the petitioner
has replied to the objections orally. After hearing the objectors and learned standing
counsel for the petitioner and after considering the material available on record, the
Commission passes the following order.

APTRANSCO filings

475. APTRANSCO, in its filings, has quoted the following applicable regulatory provisions
for consideration of its true-up by the Commission.

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Clause 17 of Regulation 5 of 2005:

CORRECTIONS FOR “UNCONTROLLABLE” ITEMS AND “CONTROLLABLE

ITEMS AND SHARING OF GAINS/LOSSES OF “CONTROLLABLE” ITEMS

The Transmission Licensee shall file its proposals for pass-through as well as
sharing of gains/losses on variations in “uncontrollable” items of ARR and
“controllable” items (indexed to external parameters) in accordance with clause 10
of this Regulation.

Clause 10 of Regulation 5 of 2005:

MULTI-YEAR TARIFF FRAMEWORK AND APPROACH

10.1 The multi-year tariff framework shall be based on the following approach, for
calculation of ARR and expected revenue from tariff and charges.

10.2 Base Year:- Values for the Base Year of the Control Period will be determined based
on the audited accounts available, the best estimate for the relevant years and other
factors considered appropriate by the Commission, and after applying the tests for
determining the controllable or uncontrollable nature of various items. The
Commission will normally not revisit the performance targets even if the targets are
fixed on the basis of base values of un-audited accounts.

10.3 Targets:- Targets will be set for items that are deemed by the Commission as
“controllable”. The trajectory for specific variables may be stipulated by the
Commission where the performance of the applicant is sought to be improved upon
through incentives and disincentives.

10.4 Controllable and Uncontrollable items of ARR:- The expenditure of the Transmission
Licensee considered as “controllable” and “uncontrollable” shall be as follows:

TRANSMISSION BUSINESS

ARR Item “ Controllable” /“Uncontrollable”

Operation & Maintenance expenses Controllable

Return on Capital Employed Controllable
Depreciation Controllable
Taxes on Income Uncontrollable
Non-tariff income Controllable

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10.5 Pass-through of gains and losses on variations in “uncontrollable” items of ARR:-

The Transmission Licensee shall be eligible to claim variations in “uncontrollable”
items in the ARR for a Control Period in the filings for the subsequent Control Period
depending on the availability of data as per actuals with respect to the effect of
uncontrollable items:

Provided that the Commission shall allow the financing cost on account of the time
gap between the time when the true-up becomes due and when it is actually allowed
and the corrections shall not be normally revisited.

10.6 Gains and losses on variations in “controllable” items of ARR:- The Transmission
Licensee in its filings for a Control Period shall present a statement of gains and
losses for each controllable item of the ARR for the previous control period. The
gains and losses for each item shall be presented after adjusting for any variations,
if any, on account of uncontrollable factors with details thereof.

10.7 For the purpose of sharing gains and losses with the users, only aggregate gains or
losses for the Control Period as a whole will be considered. The Commission will
review the gains and losses for each item of ARR and make appropriate adjustments
wherever required.

10.8 Notwithstanding anything contained in this Regulation, the gains or losses in the
controllable items of ARR on account of force majeure factors shall be passed on as
an additional charge or rebate in ARR over such period as may be specified in the
Order of the Commission.

476. APTRANSCO stated that APERC has approved the Aggregate Revenue Requirement
(ARR) for APTRANSCO of the undivided Andhra Pradesh for the period from
FY2014-15 to FY2018-19. As the state of Andhra Pradesh was bifurcated into the
State of Telangana and the residuary State of Andhra Pradesh as per the AP
Reorganization Act 2014, the activity of APTRANSCO has been limited since then to
the 13 districts of the Residuary State of Andhra Pradesh. The energy allocated to AP
is considered as 46.11% as per GO.Ms.No.20, Dt:08.05.2014. Accordingly,
transmission charges were billed on the DISCOMS as per the above percentage.

477. The detailed calculations of true-up claimed by APTRANSCO are shown in the
(Annexure -16) and a summary of the same is given in the table below:

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480. APTRANSCO proposed to collect the true-up amount from the DISCOMS as shown in
the table below:

Distribution Company Power capacity allocation ratio Amount (Cr.)

APEPDCL 36.22% 191.498

APSPDCL 40.44% 213.81

APCPDCL 23.34% 123.401

Total - 528.709

481. APTRANSCO has also stated reasons for the deviations item wise and the same would
be discussed in the Commission’s analysis in the subsequent paras.

Views/Objections/Suggestions

482. The main objection of one of the respondents, i.e., APEPDCL is that as stated by
APTRANSCO, 46.11% of the combined ARR of Transmission Business which was
approved in the Transmission Tariff Order for the 3rd control period was billed on
APDISCOMS. But, power from certain Generating Stations located in the geographical
area of Andhra Pradesh was scheduled to Telangana DISCOMs and vice versa till
June-2017. That the % share of Telangana DISCOMs in the PPAs is higher than that
of APDISCOMs and more shared plants are located in the AP geographical area,
resulting in net flows from the AP State to Telangana DISCOMs. Further, due to
Wheeling / Open Access Agreements, there were wheeling transactions between the
two States. Transmission Charges levied on the above transactions are not mentioned
in this True-Up petition and such additional revenue accrued on account of
Transmission of Electricity from AP to TS shall need to be deduced from the claim.

APTRANSCO’s response: APTRANSCO has stated that it has raised invoices on

TSTRANSCO/DISCOMS towards Transmission charges and also invited them for
entering into agreements with APTRANSCO. But they have not come forward and
intimated that “There is no mandate to APTRANSCO to claim any Transmission and
SLDC charges beyond the direction of Commission”. As the issue is yet to be resolved,
the amounts are not shown in the True-up petition. However, petitions were filed
before CERC and APERC for the determination of YTC for interstate and Intrastate
Transmission lines. The realized amounts will be adjusted/passed on to APDISCOMS.

483. The other respondent, i.e., APSPDCL’s objection is that one of the reasons for
deviations in the ARR is the reduction in revenue due to various subsidies/exemptions
extended to solar / wind / hybrid projects pursuant to the policies of the State
Government. APTRANSCO has extended various concessions in the form of waival of

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Transmission Charges & Losses to various Renewable Energy (RE) Projects who
availed Open Access. Therefore, APTRANSCO shall take measures for reimbursement
of such amounts from the Govt. of AP instead of loading the same on the DISCOMs.

APTRANSCO’s response: APTRANSCO has stated that it will follow the directions of
the Commission in this regard.

484. Further, in response to the public notice, views/objections/suggestions have been

received from Sri. M. Venugopala Rao, Hyderabad, Sri. Ch. Babu Rao, CPI (M),
FAPCCI, Bhavya Cements Pvt. Limited, Hyd and Chettinad Cement Corporation Pvt.
Limited. The objectors’ views/objections/suggestions and APTRANSCO’s responses
are as detailed below:

485. Sri. M. Venugopala Rao and Sri Ch. Babu Rao, CPI (M) have stated that the reduction
in revenue due to various subsidies and exemptions extended by Govt. of AP to Solar,
Wind, and Hybrid projects should be compensated by the GoAP. That it is unfair to
impose the above burden on the consumers of DISCOMS. That suitable amendments
to the existing Regulations can be taken up by the Commission to avoid ambiguity on
who should bear the burden of such concessions and exemptions.

APTRANSCO’s Response: APTRANSCO has stated that as per the policies of the GoAP
and APERC’s Regulations/ Guidelines, it has provided various
concessions/exemptions to Renewable Energy Projects. The revenue loss due to the
exemption of Transmission charges to RE Generators works out to Rs.63 Crores for
the 3rd Control Period. APTRANSCO addressed a letter to the GoAP with a request to
arrange for reimbursement of Rs. 63.07 Crores. That APTRANSCO addressed a letter
to the Commission with a request to amend the relevant Regulations in line with the
GO Ms. No 35 dated 18.11.2019 issued by the GoAP. The above GO was challenged
and the matter is subjudice. APTRANSCO has no objection if the Commission takes
up the issue suo-motu and amends the existing Regulations appropriately.

486. Sri. M. Venugopala Rao also stated that APTRANSCO has not submitted details
pertaining to the reduction of transmission losses achieved vis-a-vis the year-wise loss
trajectory approved by the Commission for the third control period. That even though
the transmission losses are within the limits approved by the Commission for the 3rd
control period, APTRANSCO is making claims for true-up, contending that several
measures are being taken to reduce the transmission losses further and that the
benefits due to the reduction of transmission losses during the third control period
have not led to any true-down but claims are made for spending on other measures
to reduce the transmission loss. That APTRANSCO should have sought and got the
approval of the Commission for executing projects for creating additional capacities
and the expenditures incurred in this regard are not explained. That APTRANSCO has

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accuracy equipment, replacement of aged/old conductors of overloaded lines having

more than 2% losses in a phased manner. That the benefits of reduction of
Transmission losses may not have led to true-down due to other factors. But
technically, reduction of Transmission losses has benefited APTRANSCO substantially
by way of improvement of Voltage profiles, reduction in overloading of conductors, etc.
Reduction of Transmission losses is essential for maintaining Quality Power to the
consumers. That all major transmission schemes/projects are being submitted to the
Commission for approval duly furnishing the project details. Post the approvals, the
licensee is executing the major schemes.

That the annual variations between installed generation capacities (MWs) and the
approvals for the third control period are furnished below.

Description 2014-15 2015-16 2016-17 2017-18 2018-19

Approved- Allocated
Capacities to AP as 9917.80 11034.58 11715.17 12260.19 12812.12
per Tariff Order

Actual Capacity
331.27 3685.02 2873.00 1664.44 956.24
Additions

Total actual
8039.63 11724.65 14597.65 16262.09 17218.33
Capacity

Variation w.r.t
-1878.17 690.07 2882.48 4001.90 4406.21
Approved

That the difference of around 4400 MW between the actual capacity and that approved
in the tariff order at the end of the control period is mainly due to the rapid penetration
of Renewable Energy (RE) sources into the AP Grid during the control period to the
extent of 6000 MW as per G.O. Ms. No. 39, energy (res-a1) department dated 26-09-
2012 (solar policy) and G.O.Ms.No.9 Energy, Infrastructure & Investment (PR.II)
department dated:13.02.2015 (Wind Policy). Apart from the above, there is a delay in
the actual commissioning of certain projects beyond the scheduled dates which also
caused annual variations. Backing down of projects depends on various aspects such
as must-run status of RE generation, merit order dispatch, etc.

That the Transmission Planning is generally carried out as per the guidelines of the
CEA for the installed capacity. The expansion of the transmission network will be
carried out considering the
1. New generating capacities that are likely to be added and
2. Additional load growth forecasted.

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APTRANSCO also has stated that except for Transmission lines meant for exclusive
evacuation purposes, the remaining lines are utilized both for evacuation as well as
for meeting load growth. Evacuation lines are being finalized after conducting a
thorough load flow analysis for their optimum utilization. The utilization of lines
depends on the despatches from the plant which in turn are based on various factors
such as load, demand, time of the day, merit order dispatch, etc.

That the deviation in O&M costs is due to the following factors which were beyond
their control.

Excess Addition of OCFA: The actual assets addition during the 3rd CP is Rs.7760.94
Crs. against the approved value of Rs.6821.12 Crs (58.32%) as per Tariff order, thus
an additional amount of Rs. 939.82 Cr was capitalized compared to the approval. This
is due to the additions of assets that were originally contemplated in the 2nd control
period and could not be commissioned due to ROW issues and other various reasons
and spilled over to the 3rd control period. Thus, there is an excess addition of 7Nos.
Substations and 1296 CKM of lines.

APTRANSCO has further stated that the pay revisions that occurred in FY2014 &
FY2018 were not factored in the filing of ARR & FPT filings for the 3rd Control Period
as it becomes the benchmark for the Unions and Associations of the employees for
claiming the fitment & other allowances in the wage negotiations. Similarly, the wages
of outsourced employees have also increased twice (as per Labor department rules) in
the 3rd Control period. The occurrence of multiple pay revisions in a Control period
is a rare event. The pay revisions were determined in a systematic manner, duly
following established guidelines such as forming a committee, negotiations with
unions, etc., and upon final approval by the Govt. only, the Pay Revisions were
implemented. All these factors have cumulatively affected the O&M and R&M costs.
Even though the above expenditures are controllable in nature, the variations
occurred due to uncontrollable factors. Hence, APTRANSCO requests the Commission
to consider the above expenditure. R&M expenses were arrived at based on the actual
opening GFA which is less than the approved opening GFA.

That Gujarat Electricity Regulatory Commission issued Tariff Order (Case No. 1837 of
2019, 26th March 2020) on Truing-up for FY2018-19 & Determination of Tariff for
FY2020-21 wherein the impact of the 7th Pay Commission has been considered based
on the actual payout.

That the details of Substations approved and that were actually executed are given
below:

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Regulation permits the Commission to determine the depreciation only “generally”

based on the CERC guidelines. It does not mandate a complete and total adoption of
the CERC guidelines. In view of the above, MoP rates and procedures were adopted
for the computation of depreciation. That normalcy of supply was restored
immediately during the Hud-Hud cyclone by utilizing APTRANSCO funds to minimize
interruption/inconvenience to consumers on a contingency basis. Regarding the
insurance of assets, the estimated insurance premium against Fire, Earthquake,
Terrorism works out to around Rs.50 crores per annum totaling to an amount of
Rs.257 Crores for the entire Control period. Based on the analysis of past
data/experience of such accidents/incidents, it was decided to meet the expenditure
when incidents occur from APTRANSCO funds instead of insuring the assets of
APTRANSCO at a huge cost which anyhow has to be borne by DISCOMS/Consumers
ultimately. That APTRANSCO took up the restoration works on war footing instead of
waiting for the release of funds from other agencies to minimize the
interruption/inconvenience to the consumers. Further, no assistance has been
received by APTRANSCO either from the GoAP or GoI in this regard. That even though
the True-up expenditures are controllable in nature, the variations occurred due to
uncontrollable factors such as spillover of 2nd control period works due to ROW
issues, court cases, wage revisions of outsourced employees due to Labor Commission
directions, and non-factoring of Employee pay Revisions. That while preparing the
MYT filings, the wage revision effect is not considered as it becomes the benchmark
for the Unions and Associations of the employees for claiming the fitment & other
allowances in the wage negotiations. APTRANSCO will follow the directions of the
Commission regarding sharing of gains/losses.

488. Bhavya Cements Pvt. Limited and Chettinad Cement Corporation Pvt. Ltd, have stated
that the claimed Employees Cost, A&G Expenses, and O&M Expenses are without
prejudice. The GFA to be considered for all purposes in true-up (viz R&M, RRB,
depreciation, etc.) will have to be limited to the approved GFA or the actual GFA
whichever is lower. It is also necessary to ascertain the gross value of the assets which
are no longer in use in each financial year and to remove such value from the GFA.
The GFA to be considered for the purposes of R & M expenses is the approved Opening
GFA as per the approved investment plan or the actual opening GFA whichever is less.
That it is not clear from the petition as to how the depreciation has been computed.
That unless expressly shown by pleadings and evidence that they are due to
uncontrollable factors, no part of such losses can be passed through to the
consumers. Moreover, Other Expenditure is classified neither as an uncontrollable
item nor as a controllable item in Clause 10.4, and therefore it is not an item subject
to truing up in terms of Clause 10.5 to 10.7 or 10.8 of the Regulation. The losses are
entirely to the licensee’s account. That levying true up charges on the consumers is

Page 487 of 534

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Chapter - XVI

against the Tariff policy of the Central Government contemplated under Section 3(3)
of Electricity Act, 2003 as per which availability of electricity to consumers at
reasonable and competitive rates has to be ensured. No specific formula/device has
been formulated in the Tariff Policy for sharing of gains and losses with the consumers
as part of the overall MYT framework. Therefore, any determination of true-up in the
present proceedings cannot by itself result in any additional tariff. That the RRB
calculation for RoCE has to be on the basis of the GFA as approved in the investment
plan or the actual GFA whichever is lower. Return on the Capital Employed (RoCE) is
to be computed having regard to the submissions supra on the GFA, RRB, and
working capital and should be borne by the licensee alone. That with respect to
Controllable Items, the sharing of gains ought to be allowed only if the gain has been
due to any identifiable efficiency improvement in the working of the utility, and not
otherwise. The licensees have not pleaded or demonstrated by details or evidence of
any force majeure circumstances with respect to any of the losses in any controllable
item. The licensee has to present a statement of gain/loss against each controllable
item after adjusting variations on account of uncontrollable factors. The licensees
have failed and omitted to make any proposals for sharing. On the contrary, their
approach appears to be that all losses in controllable items are also to be passed
through.

APTRANSCO’s Response: AP Transco has furnished a similar reply as supra in

respect of similar issues. It has stated that it filed the True-Up petition as per APERC
Regulation 5 of 2005. That the RRB calculation for RoCE is done based on actual GFA
in line with the Regulation. The Actual RoCE is within the limits of APERC’s approval.
That the additional expenditure is due to factors that are beyond the control of
APTRANSCO. That comparative statements are furnished in respect of actual
expenditure Vs approved / allowed expenditure in the petition.

COMMISSION’S Views/Analysis/Decision

489. In the light of the various issues raised by the stakeholders and the replies furnished
to the same by APTRANSCO, the Commission would verify all the claims item-wise in
accordance with the relevant regulation as detailed hereunder to arrive at the final
permissible true-up amount. APTransco has considered 58.32 percent of the ARR for
the residuary State of Andhra Pradesh, out of the total ARR approved in the MYT
Order for the 3rd control period for the undivided State of Andhra Pradesh, in its
computations. However, the Commission has considered this percentage as 46.11
in its analysis and computations.

O& M Costs:

490. The Commission has made a comparative statement as shown below:

Page 488 of 534

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Chapter - XVI

Table 66: The comparative analysis on gross O&M costs for 3rd CP (Cr.)

Financial Approved in Approved for Approved for Actuals variation variation over
Year Tariff Order Residual AP Residual AP as per over 46.11% as per
for erstwhile (@ 58.32% of (@ 46.11 of True-up 58.32% of the Tariff order
AP erstwhile AP) erstwhile AP) filings the Tariff
as per filings as per the order
Commission’s
computations

1 2 3= (2*58.32%) 4=(2*46.11%) 5 6 = (3-5) 7 = (4-5)

2014-15 656.25 428.31 361.54 696.92 -268.61 -335.38

2015-16 714.98 416.98 329.68 483.13 -66.15 -153.45

2016-17 779.54 454.63 359.45 557.73 -103.10 -198.28

2017-18 845.51 493.1 389.86 602.10 -109.00 -212.24

2018-19 918.08 535.42 423.33 768.10 -232.68 -344.77

Total 3914.36 2328.44 1863.86 3107.98 -779.54 -1244.12

As could be seen from the above, the actual gross O&M costs have increased by
Rs.1244.12 Cr over the control period with reference to the approval (46.11 percent
share). APTRANSCO has stated in its filings that the increase in O&M Costs is mainly
driven by the length of the lines and number of SS. Employee Costs which constitute
a major portion of the O&M expenses include salaries of the staff, payments related
to Pension & Gratuity Contribution to the Trust as per Actuarial Valuation Report,
surrender leave, various medical allowances, leave travel allowances and other
allowances. APTRANSCO also stated that the salaries of employees were revised in
FY2014-15 and FY2018-19 due to which the O&M Expenses are considerably higher
than the expenses estimated by the Commission in the Transmission Tariff Order for
FY2014-19. APTransco in its replies to the objectors further stated that the two wage
revisions in one control period are rare events and though the O&M costs are a
controllable item as per the regulation, the variation beyond the approvals is due to
uncontrollable factors such as mandatory pay revisions and wage agreements. Per
contra, the objectors have stated that though the wage revisions are imperative, the
Commission can determine the permissible impact of pay revision as a part and parcel
of O&M expenditure by adopting prudent norms. The objectors also contended to limit
the O&M expenditure to the approved value as it is a controllable item.

The Commission in order to examine further, the breakup of actual O&M expenses,
has obtained the details of APTransco subsequently as per their audit reports which
are given in the table below:

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C M Y K
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Chapter - XVI

The actual O&M costs claimed by the APTransco are less than the norms prescribed
by the Commission vide MYT Order for 3rd Control Period. Hence, the Commission is
inclined to accept the actual O&M expenditure filed by the APTransco.

Depreciation

491. APTRANSCO has claimed depreciation amounts at the rates notified by the MoP.
Although the regulation says that the depreciation shall be generally at the rates and
terms specified by the CERC. After recording the reasons, the Commission has
computed the depreciation at the rates notified by MoP in MYT order on transmission
tariffs for the 3rd control period. Hence, the Commission has to adopt the same rates
in the computation of true-ups for the sake of consistency and certainty. A
comparative analysis of the depreciation is shown in the table below:

Table 71: Comparative analysis of the actual Depreciation during the 3rd CP

(Rs. Crs.)

Financial Approved Approved for Approved for Actuals variation over variation over
Year in Tariff Residual AP Residual AP as per 58.32% of 46.11% as
Order for (@ 58.32% of (@ 46.11 % of True-up the Tariff per the Tariff
erstwhile erstwhile AP) erstwhile AP) filings order order
AP

1 2 3 4 5 6 (3-5) 7 (4-5)

2014-15 560.22 365.64 308.63 286.14 79.50 22.49

2015-16 686.59 400.42 316.59 273.54 126.88 43.05

2016-17 918.56 535.7 423.55 335.65 200.05 87.9

2017-18 1035.26 603.76 477.36 518.70 85.06 -41.34

2018-19 1046.4 610.26 482.5 604.29 5.97 -121.79

Total 4247.03 2515.78 2008.63 2018.32 497.46 -9.69

As could be seen from the above table, the cumulative depreciation at the end of the
third control period is more by Rs. 9.69 Cr over the approvals (at 46.11 percent share).
The Commission has verified and found that the depreciation amounts claimed are as
per the books of accounts. Therefore, the Commission accepts the depreciation
amounts filed by APTRANSCO.

Page 492 of 534

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Chapter - XVI

Other Expenses

492. APTRANSCO claimed the ‘Other Expenses’ and the comparative analysis of the same
with approvals is shown in the table below:

Table 72: Other expenses during the 3rd Control Period (Rs. Crs.)

Financial Approved Approved Approved Actuals variation variation

Year in Tariff for for as per over over
Order for Residual Residual True-up 58.32% of 46.11% as
erstwhile AP AP filings the Tariff per the
AP (@ 58.32% of (@ 46.11 of order Tariff
erstwhile AP) erstwhile AP) order

(1) (2) (3) (4) (5) 6=(3-5) 7=(4-5)

2014-15 0 0 0 21.26 -21.26 -21.26

2015-16 0 0 0 1.77 -1.77 -1.77

2016-17 0 0 0 2.83 -2.83 -2.83

2017-18 0 0 0 0.00 0.00 0

2018-19 0 0 0 0.00 0.00 0

Total 0 0 0 25.86 -25.86 -25.86

As could be seen from the above table, there is no provision in the approved ARR for
other expenses and the APTRANSCO claimed an amount of Rs.25.86 Cr in this regard.
APTRANSCO stated that this expenditure was due to the rectification works taken up
post HUD HUD cyclone and that it has not received any financial support either from
the GoAP or the Central government. The Commission has verified audited books of
accounts and finds that the expenditure is legitimate. Hence, the Commission is
inclined to accept the expenditure as filed

Taxes:

493. The taxes are uncontrollable items as per the regulation. The comparative statement
on taxes is shown in the table below (Rs. Crs):

Page 493 of 534

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Chapter - XVI

Financi Approved Approved Approved Actuals variation variation

al in Tariff for for as per over over
Year Order for Residual Residual True-up 58.32% of 46.11% as
erstwhile AP (@ AP (@ filings the Tariff per the
AP 58.32% of 46.11 of order Tariff order
erstwhile erstwhile
AP) AP)

(1) (2) (3) (4) (5) 6= (3)-(5) (7) =(4)-(5)

2014-15 52.8 34.46 29.09 36.99 -2.53 -7.9

2015-16 71.69 41.81 33.06 28.58 13.23 4.48

2016-17 90.16 52.58 41.57 33.47 19.11 8.1

2017-18 95.86 55.91 44.2 35.92 19.99 8.28

2018-19 98.86 57.66 45.58 4.54 53.12 41.04

Total 409.37 242.42 193.5 139.50 102.92 54.00

As could be seen from the above table, the actual tax paid is less than the approval
(at 46.11 share). The Commission has also computed taxes to be paid on the actual
equity portion of ROCE which works out to be Rs.182.05 Cr. Therefore, after
examining the actual taxes vis-a-vis approvals and the taxes on actual equity, the
Commission is inclined to accept the actual taxes as claimed.

Return On Capital Employed

494. APTRANSCO has stated that the return on capital employed (ROCE) is computed
based on the Regulated Rate Base (RRB). The RRB is arrived at by deducting the
accumulated depreciation and consumer contributions from the value of gross fixed
assets and adding the working capital requirements for each year of the control period
plus the change in RRB during each year. The Commission has taken the actual cost
of debt from the debt profile of APTRANSCO and considered the return on equity (ROE)
as 14 percent and debt/equity ratio as 75:25 as approved in MYT Order, for computing
the weighted average cost of capital (WACC) to multiply it with RRB to arrive at ROCE.

The Commission has compared the Original cost of fixed assets (OCFA), RRB, WACC
and ROCE as shown in the tables below:

Page 494 of 534

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Chapter - XVI

Table 73: Comparison of Original Cost of Fixed Assets during the 3rd CP

(Rs. Crs)

Financial Approved Approved Approved Actuals Variation Variation

Year in Tariff for for as per over over
Order for Residual AP Residual True up 58.32% of 46.11% as
erstwhile (@ 58.32% AP filings the Tariff per the
AP of erstwhile (@ 46.11 order Tariff order
AP) of
erstwhile
AP)

(1) (2) (3) (4) (5) (6)= (3)-(5) (7)= (4)-(5)

2014-15 13604.08 8878.93 7494.71 5557.76 3321.17 1936.95

2015-16 17963.47 10476.3 8282.96 6681.7 3794.60 1601.26

2016-17 20149.04 11750.92 9290.72 8733.73 3017.19 556.99

2017-18 21655.88 12629.71 9985.53 10552.04 2077.67 -566.51

2018-19 23134.56 13492.08 10667.35 12732.13 759.95 -2064.78

Total 96507.03 57227.94 45721.27 44257.3 12970.58 1463.91

6

As could be seen from the above table, the OCFA has been less by Rs.1463.91 Cr.
compared to the approval (at 46.11 percent share)

Table 74: Comparison of Regulated Rate Base during the 3rd CP (Rs. Crs.)

Financial Approved Approved Approved Actuals variation variation over

Year in Tariff for for as per over 46.11% as
Order for Residual AP Residual True up 58.32% per the Tariff
erstwhile (@ 58.32% AP filings of the order
AP of erstwhile (@ 46.11 of Tariff
AP) erstwhile order
AP)

1 2 3 4 5 6 (3-5) 7 (4-5)

2014-15 6079.52 3967.9 3349.31 2223.71 1744.19 1125.6

2015-16 8255.36 4814.53 3806.55 2703.02 2111.51 1103.53

2016-17 10382.55 6055.1 4787.39 3763.06 2292.04 1024.33

2017-18 11038.70 6437.77 5089.94 5513.73 924.04 -423.79

2018-19 11384.37 6639.36 5249.33 6762.27 -122.91 -1512.94

Total 47140.50 27914.66 22282.52 20965.79 6948.87 1316.73

Page 495 of 534

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Chapter - XVI

As could be seen from the above table, the RRB has been less by Rs.1316.73 Cr.
compared to the approval (at 46.11 percent share)
Table 75: Weighted Average Cost of Capital (percent)

Financial Tariff Order True up filings WACC

Year Variation
Cost of Return WACC Cost Retur WACC over
Debt on of n on Tariff
Equity Debt Equity Order

(1) (2) (3) (4) (5) (6) (7) (8)=(7)-(4)

2014-15 12.00% 14.00% 12.50% 14.20% 14.00% 14.15% 1.65%

2015-16 12.00% 14.00% 12.50% 10.59% 14.00% 11.44% -1.06%

2016-17 12.00% 14.00% 12.50% 11.03% 14.00% 11.77% -0.73%

2017-18 12.00% 14.00% 12.50% 9.98% 14.00% 10.99% -1.52%

2018-19 12.00% 14.00% 12.50% 8.62% 14.00% 9.97% -2.54%

As could be seen from the above table, the cost of debt during the FY2014-15 was
more than what is approved and during the remaining years in the control period,
the cost of debt is less than what is approved in the MYT order for 3rd CP.
APTRANSCO computed the ROCE based on the actual cost of debt and a comparison
ROCE is shown in the table below:

Table 76: Comparison of ROCE during the 3rd CP (Rs. Crs.)

Financial Approved Approved Approved Actuals variation variation

Year in Tariff for for as per over 58.32% over 46.11%
Order for Residual Residual True-up of the Tariff of the Tariff
erstwhile AP AP filings order order
AP (@ 58.32% (@ 46.11
of erstwhile of
AP) erstwhile
AP)

(1) (2) (3) (4) (5) (6) =(3)-(5) (7)= (4)-(5)

2014-15 759.94 495.99 418.66 314.65 181.34 104.01

2015-16 1031.92 601.82 475.82 309.29 292.53 166.53

2016-17 1297.82 756.89 598.42 443.01 313.88 155.41

2017-18 1379.84 804.72 636.24 605.68 199.04 30.56

2018-19 1423.05 829.92 656.17 673.86 156.06 -17.69

Total 5892.57 3489.34 2785.31 2346.49 1142.85 438.82

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Chapter - XVI

As could be seen from the above table, the ROCE is less by Rs.438.82 Cr compared
to the approval (at 46.11% share). On verification of the computations of ROCE, it is
found that the same are in accordance with the regulation. However, as discussed
above, the cost of debt during the FY2014-15 is more than what is approved and
hence the same is limited to the approved rate in the MYT tariff order The ROCE has
been recomputed by the Commission with the above modification and a comparison
of ROCE with the above modification is shown in the table below:

Table 77: ROCE computed by the Commission during the 3rd CP (Rs. Crs.)

Financi Approved Approved Approved ROCE as per variation variation

al Year in Tariff in Tariff in Tariff Commission’ (58.32% (46.11% of
Order (Earst Order Order s of tariff tariff
while AP) (58.32% of (46.11 of computation order) order)
erstwhile AP) erst while for true up
AP)

(1) (2) (3) (4) (5) (6)= (3)- (7)= (4)-(5)

(5)

2014- 759.94 495.99 418.66 277.96 218.03 140.6965

15

2015- 1031.92 601.82 475.82 309.29 292.53 166.53

16

2016- 1297.82 756.89 598.42 443.01 313.88 155.41

17

2017- 1379.84 804.72 636.24 605.68 199.04 30.56

18

2018- 1423.05 829.92 656.17 673.86 156.06 -17.69

19

Total 5892.57 3489.34 2785.31 2309.80 1179.54 475.51

As could be seen from the above tables, there is a change in the ROCE (at 46.11
percent) from Rs.438.82 Cr. to Rs.475.51 Cr compared to the previous table. The
revised ROCE as per the above table has been considered by the Commission to arrive
at the aggregate loss or gain. The contention of one of the objectors that the OCFA &
RRB should be less than that approved in the MYT order or actuals is not in
accordance with regulation.

Page 497 of 534

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C M Y K

Chapter - XVI

Table 79: Comparison of Non-Tariff Income of APTRANSCO during the 3rd

control period

Financial Approved Approved Approved Actuals variation variation

Year in Tariff for Residual for as per over over
Order for AP Residual True-up 58.32% of 46.11%
erstwhile (@ 58.32% AP filings the Tariff of the
AP of erstwhile (@ 46.11 of order Tariff
AP) erstwhile order
AP)

(1) (2) (3) (4) (5) 6= (3)-(5) (7)= (4)-(5)

2014-15 128.92 84.14 71.02 71.63 12.51 -0.61

2015-16 135.28 78.9 62.38 123.26 -44.36 -60.88

2016-17 141.93 82.77 65.44 166.18 -83.41 -100.74

2017-18 148.88 86.83 68.65 102.60 -15.77 -33.95

2018-19 156.26 91.13 72.05 201.36 -110.23 -129.31

Total 711.27 423.77 339.54 665.03 -241.26 -325.49

As could be seen from the above table, the Non-Tariff Income of APTRANSCO exceeded
the approval (at 46.11 percent) by Rs.325.49 Cr. as per books of accounts. Hence, the
Commission is inclined to accept the same without any modification.

497. As per the procedure discussed above, the Commission has arrived at a true-up (net
aggregate loss) of Rs.492.02 Cr as against the Rs.528.71 Cr. filed by the APTRANSCO.
The detailed calculations are shown in the annexure-17. The summary is given in the
table below:

Page 499 of 534

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C M Y K
 C M Y K

Chapter - XVI

503. The Commission directs APTRANSCO to adjust the true-up (aggregate loss) amount
of Rs.492.02 Cr. determined in this order for the third control period, from the POC
charges if and when it receives in the future and any balance amount left after the
adjustment shall be transferred to the DISCOMS. If there is any shortfall after the
adjustment due to the receipt of less amount towards the POC charges, APTRANSCO
may approach the Commission to recover such shortfall amount. APTRANSCO is also
directed to clear the pending dues to the pension and gratuity (P&G) trusts as shown
in this order from the receivables and submit a compliance report to the Commission.

Sd/ Sd/ Sd/

THAKUR RAMA SINGH JUSTICE C.V. NAGARJUNA REDDY P. RAJAGOPAL REDDY
MEMBER CHAIRMAN MEMBER

Page 502 of 534

 C
ANNEXURE - 1
Filing and Approved: Power purchase cost for FY2019-20 – APSPDCL
Energy (MU) Fixed Cost (Rs. Crs.) Variable Cost (Rs. Crs.) Total Cost (Rs.Crs.)
Generating Station
Approved Actuals Diff. Approved Actuals Diff. Approved Actuals Diff. Approved Actuals Diff.

M
Apgenco-Thermal
Dr. NTTPS 5293.05 4624.49 -668.56 528.72 436.01 -92.71 1413.25 1536.66 123.41 1941.97 1972.67 30.70
Dr. NTTPS-IV 2136.28 1964.36 -171.92 226.78 216.16 -10.62 514.84 612.45 97.61 741.62 828.61 86.99
RTPP Stage-I 1070.54 800.79 -269.75 199.21 167.56 -31.65 336.15 304.69 -31.46 535.36 472.25 -63.11
RTPP Stage-II 808.67 1196.54 387.87 192.21 162.66 -29.55 253.92 456.65 202.73 446.13 619.31 173.18
RTPP Stage-III 302.58 368.34 65.76 178.38 166.36 -12.02 95.01 140.14 45.13 273.39 306.50 33.11

Y
RTPP Stage-IV 367.77 1446.87 1079.10 40.45 353.44 312.99 115.48 614.32 498.84 155.93 967.76 811.83
APPDCL Stage-I 6894.42 4369.88 -2524.54 703.24 634.74 -68.50 1799.44 1339.56 -459.88 2502.68 1974.30 -528.38
Genco-Thermal Total 16873.31 14771.27 -2102.04 2068.99 2136.93 67.94 4528.09 5004.47 476.38 6597.08 7141.40 544.32
Srisailam RCPH 436.54 859.89 423.35 131.25 142.31 11.06 0.00 0.00 0.00 131.25 142.31 11.06
NSRCPH 75.96 66.52 -9.44 13.50 16.29 2.79 0.00 0.00 0.00 13.50 16.29 2.79
NSTPDC PH 3.94 49.60 45.66 32.65 34.27 1.62 0.00 0.00 0.00 32.65 34.27 1.62
Upper Sileru 459.21 411.02 -48.19 46.27 49.01 2.74 0.00 0.00 0.00 46.27 49.01 2.74

K
Lower Sileru 790.33 549.95 -240.38 88.68 93.93 5.25 0.00 0.00 0.00 88.68 93.93 5.25
Donkarayi 56.61 46.09 -10.52 4.82 5.10 0.28 0.00 0.00 0.00 4.82 5.10 0.28
PABM 1.81 0.61 -1.20 7.72 8.46 0.74 0.00 0.00 0.00 7.72 8.46 0.74
Minihydel(Chettipet) 1.82 1.44 -0.38 0.58 1.08 0.50 0.00 0.00 0.00 0.58 1.08 0.50
Machkund AP Share 210.57 223.60 13.03 22.35 27.46 5.11 0.00 0.00 0.00 22.35 27.46 5.11
TB Dam AP Share 65.13 103.86 38.73 15.33 18.36 3.03 0.00 0.00 0.00 15.33 18.36 3.03
Genco Hydel Total 2101.92 2312.58 210.66 363.15 396.27 33.12 0.00 0.00 0.00 363.15 396.27 33.12
APGENCO-TOTAL 18975.23 17083.85 -1891.38 2432.14 2533.20 101.06 4528.09 5004.47 476.38 6960.23 7537.67 577.44
APGPCL Stage-I 21.35 18.01 -3.34 1.37 1.87 0.50 5.15 6.12 0.97 6.52 7.99 1.47
APGPCL Stage-II 59.27 80.91 21.64 2.89 6.47 3.58 12.74 28.01 15.27 15.63 34.48 18.85
Godavari Gas Power Plant 661.73 412.52 -249.21 52.28 17.06 -35.22 145.58 121.72 -23.86 197.86 138.78 -59.08
Spectrum Power 620.54 356.00 -264.54 57.09 32.75 -24.34 148.31 94.37 -53.94 205.40 127.12 -78.28
LANCO Kondapalli 770.24 498.44 -271.80 73.94 27.08 -46.86 179.47 141.21 -38.26 253.41 168.29 -85.12
GAS-TOTAL 2133.13 1365.88 -767.25 187.57 85.23 -102.34 491.25 391.43 -99.82 678.82 476.66 -202.16
NTPC(SR) Ramagundam I & II 1194.14 1255.35 61.21 91.77 90.72 -1.05 260.32 327.15 66.83 352.09 417.87 65.78
NTPC(SR) Simhadri Stage-I 1473.69 1915.76 442.07 203.41 272.32 68.91 394.95 660.00 265.05 598.36 932.32 333.96
NTPC(SR) Simhadri Stage-II 498.01 763.89 265.88 132.03 141.42 9.39 133.47 256.52 123.05 265.50 397.94 132.44
NTPC(SR) Talcher Stage-II 806.54 743.60 -62.94 57.40 60.38 2.98 112.11 149.62 37.51 169.51 210.00 40.49

Page 503 of 534

 Energy (MU) Fixed Cost (Rs. Crs.) Variable Cost (Rs. Crs.) Total Cost (Rs.Crs.)

C
Generating Station
Approved Actuals Diff. Approved Actuals Diff. Approved Actuals Diff. Approved Actuals Diff.
NTPC(SR) Ramagundam III 332.17 331.56 -0.61 24.66 25.66 1.00 71.42 85.30 13.88 96.08 110.96 14.88
NTPC Kudgi Stage-I 106.24 481.90 375.66 208.50 212.51 4.01 38.03 181.40 143.37 246.53 393.91 147.38
NTECL Valluru 427.63 247.21 -180.42 76.67 111.48 34.81 94.08 95.08 1.00 170.75 206.56 35.81
NLC Stage-I 157.96 216.69 58.73 15.19 16.42 1.23 45.49 58.71 13.22 60.68 75.13 14.45
NLC Stage-II 259.37 374.78 115.41 28.32 32.20 3.88 74.70 101.67 26.97 103.02 133.87 30.85

M
NPC(MAPS) 86.65 39.43 -47.22 0.00 0.00 0.00 19.32 -0.47 -19.79 19.32 -0.47 -19.79
NPC(KAIGA unit I,II,III,IV) 535.40 569.81 34.41 0.00 0.00 0.00 172.40 155.86 -16.54 172.40 155.86 -16.54
NTPL(NLC TamilNadu) 583.34 425.95 -157.39 92.04 89.17 -2.87 139.42 126.11 -13.31 231.46 215.28 -16.18
NLC NNTPS 238.33 18.24 -220.09 48.00 3.29 -44.71 59.34 4.19 -55.15 107.34 7.48 -99.86
JNNSM Ph-1 Thermal 226.29 118.53 -107.76 31.68 0.00 -31.68 49.33 56.91 7.58 81.01 56.91 -24.10
JNNSM Ph-2 Thermal 2886.86 1943.33 -943.53 288.69 0.00 -288.69 721.72 840.82 119.10 1010.41 840.82 -169.59

Y
NTPC WR&NR(Sept 2019) 0.00 209.64 209.64 0.00 46.20 46.20 0.00 78.66 78.66 0.00 124.86 124.86
CGS TOTAL 9812.62 9655.67 -156.95 1298.36 1101.76 -196.60 2386.10 3177.53 791.43 3684.46 4279.29 594.83
KSK Mahanadi 1834.83 1403.88 -430.95 294.46 216.07 -78.39 477.06 386.11 -90.95 771.52 602.18 -169.34
Thermal Powertech
1057.76 1218.10 160.34 191.94 193.88 1.94 207.32 283.05 75.73 399.26 476.93 77.67
Corporation
Hinduja National Powercorp 0.00 1806.81 1806.81 0.00 0.00 0.00 0.00 690.20 690.20 0.00 690.20 690.20
SRIVATHSA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

K
IPP TOTAL 2892.59 4428.79 1536.20 486.40 409.94 -76.46 684.38 1359.36 674.98 1170.78 1769.30 598.52
NCE- Others 700.25 699.15 -1.10 0.00 0.00 0.00 329.38 118.61 -210.77 329.38 118.61 -210.77
NCE Wind 6051.38 6833.60 782.22 0.00 0.00 0.00 2801.79 3189.17 387.38 2801.79 3189.17 387.38
NCE Solar 3931.72 2449.88 -1481.84 0.00 0.00 0.00 1748.52 1191.00 -557.52 1748.52 1191.00 -557.52
JNNSM Ph-1 Solar 42.95 30.42 -12.53 0.00 0.00 0.00 45.83 38.10 -7.73 45.83 38.10 -7.73
JNNSM Ph-2 Solar 0.00 2349.96 2349.96 0.00 0.00 0.00 0.00 1088.53 1088.53 0.00 1088.53 1088.53
NCE TOTAL 10726.30 12363.01 1636.71 0.00 0.00 0.00 4925.52 5625.40 699.88 4925.52 5625.40 699.88
SHORT TERM PURCHASE 390.44 1482.74 1092.30 0.00 0.00 0.00 156.17 581.37 425.20 156.17 581.37 425.20
SWAP RETURN -2709.29 -2165.98 543.31 -293.91 0.00 293.91 -795.04 -810.29 -15.25 -1088.95 -810.29 278.66
POSOCO (CGS UI charges) 0.00 16.55 16.55 0.00 0.00 0.00 0.00 25.46 25.46 0.00 25.46 25.46
SHORTTERM TOTAL -2318.85 -666.69 1652.16 -293.91 0.00 293.91 -638.87 -203.46 435.41 -932.78 -203.46 729.32
D<--->D TRANSACTION -616.34 -4854.88 -4238.54 0.00 0.00 0.00 -247.77 -1951.66 -1703.89 -247.77 -1951.66 -1703.89
Sale of Power 0.00 -17.52 -17.52 0.00 0.00 0.00 0.00 -7.31 -7.31 0.00 -7.31 -7.31
GRAND TOTAL 41604.68 39358.11 -2246.57 4110.56 4130.13 19.57 12128.70 13395.77 1267.07 16239.26 17525.91 1286.65

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Filing: Power purchase cost for FY2019-20 - APEPDCL

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Approved: Power purchase cost for FY2019-20 – APEPDCL

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Sl. No Participant
30 Srilalitha Alajangi
31 Stephan Raj Jonnada
32 Tarun Reddy
33 Venugopala Rao
34 Vijay Reddy
35 Senthil Kumar

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ANNEXURE - 5
APERC public notice on True up cost for FY2019-20 APSPDCL &
APEPDCL

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ANNEXURE - 6
PAPER NOTIFICATION

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Filing and Approved: Power purchase cost for FY2020-21 – APEPDCL

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Filing and Approved: Power purchase cost for FY2020-21 – APCPDCL

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ANNEXURE 11
LIST OF OBJECTORS
Objectors who gave written objections/Suggestions
Sl.No Name
1 M Venugopal Rao
2 S.Suryaprakasa rao
3 Ch.Babu Rao, CPI
4 Ch.Narasinga Rao, CPI
5 East Coast Paints Ltd
6 Hemadri Cements Ltd
7 Jayansree Pharma
8 Lokesh Aqua Products P Ltd
9 Pramod Paints LLP
10 Sainor Life Sciences
11 A.Radha Krishna Chowdary, Kushalava
12 Ameya Batteries
13 Harsha liners Pvt Ltd.,
14 Hyundai Kushalava
15 Indian Tobbacco Assn
16 Kandharapu Murali
17 M.Rama Rao, Kushalava
18 Sree Balaji Brick Inds
19 Bliss Hotels Ltd.,
20 Bhaskar Rao Potluri
21 Fortune Select Grande
22 Sri Balaje Residency
23 C Ravindra Kumar
24 AG Rajamohan
25 Lingamaneni Estates
26 Mondelez India
27 FAPCCI
28 Synergies Castings Ltd
29 P Ravikumar / Mini Hotels
30 M Upendra Rao - AP Chambers
31 Sricharan
32 Prakasa Spectrocast
33 Andhra Pradesh Textile Mills Association
34 The India Cements Limited
35 Rain Cements Limited
36 Sourth Indian Cement Manufacturers Association
37 Andhra Pradesh Ferro Alloys Producers Association

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Objectors who gave written objections/Suggestions

Sl.No Name
38 Arcelor Mittal Nippon Steel India Limited
39 TGV Sraac Limited
40 Kusalava International Ltd - VJA3068
41 Kusalava International Ltd - VSP646 -
42 Kusalava International Ltd - VJA093
43 Kusalava International Ltd - VJA505
44 Kusalava Finance Limited - VJA806
45 Arcelor Mittal Nippon Steel India Limited
46 Vizag Chamber of Commerce
47 Hotel Nagavali - Distrn True Up
48 K.M.Rashid Khan
49 T Vinod Kumar
50 T Satyam
51 President, A.P Hotels Association
52 P.Vivekananda
53 M.Basawa Punnaiah
54 APSHWRMA
55 BSN Estates
56 Sunita Mehta Jain
57 Masineni Hotels Pvt Ltd.,
58 Ramasudhakar
59 Sree Jayajothi Cements Privae Limited
60 Nalluri Raghava rao
61 Kameswari Hotels (P) Ltd,
62 Better castings
63 Fortune Murali park same as Kandhali Hotels
64 Khandari Hotels
65 M convention
66 M Hotel
67 M5 Hotel
68 Metro politan hotel
69 Prakasa Spectrocast
70 VZM chamber of commerce
71 Brakes India Pvt. Ltd.,
72 Mohan Spintax pvt ltd.
73 APPCCIF
74 Adhishakthi smelters pvt ltd.,
75 Ravali Spinners pvt ltd
76 M. Thimma Reddy
77 My home Industries Private Limited

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Objectors/Officials/Public who participated during hearing

held on 19-10-2021
S.No Name
1 AP Ferro Alloys
2 Advocate Rajesh Raktate
3 Advocate Sricharan
4 AGM
5 Alladi Ravider
6 Ananny Ghosh
7 APCPDCL Telecom
8 APEPDCL RAC VSP
9 B. Sudarsanam
10 Bhaskar Rao Polluri
11 Baburao Chigurupati
12 Bhaskar Vemula
13 Bujji Babu Madala
14 Chowdary Arekapudi
15 CMD, APCPDCL
16 CPIM, AP
17 Dayanand Edara
18 EE-IPC, APGDDCL
19 Gopinath I
20 Gouri Prasad
21 Gunaranjan Challa
22 Harmory Foods Pvt Ltd
23 Jaganndh
24 Joint MD
25 KV Satyanarayana
26 K. Srinivas
27 KCP Cement
28 Kotirao Peravali
29 Krishna Murthy
30 Kumara Swamy K
31 Lakshmi Devi Kancham
32 Lokesh Pai
33 Madhavareddy Bhimireddy
34 Midhun Ogirala
35 Murthy N
36 Nagarjuna Gopi D
37 Narsimha Rao PV
38 Narayana

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Objectors/Officials/Public who participated during hearing

held on 19-10-2021
S.No Name
39 Nivedita Saxena
40 P. Vydehi FAPCCI
41 Phanindra Kumari
42 Prakasa Spectro
43 Pramod Kumar
44 RAC, CPDCL
45 RAC Wing
46 Rahul M
47 Raja Sekhar B
48 Rajanikanth Reddy
49 Rajesh Gutta
50 Rajesh Kumar
51 Rajesh Dasapthi
52 Rajmohan AG
53 Sai Babu Yella
54 Sailendra, IWPA
55 Sammireddy (Penna Cement)
56 Sangeetha Kotipalli
57 Satish Shrikhande
58 Shanmuga M
59 Shiva Rao P
60 Shivkumar
61 Shreekant Vijay Dhuri
62 Shri Govindaraja T
63 Siva Gangadhara
64 Snrkr Taxtiles
65 Sreenivasulu Jana
66 Sridhar G
67 Srilatha Alajangi
68 Srinath PV
69 Srinivasa Cotton & oil
70 Srinivasulu K
71 Sriram Joshi
72 Sudhir Mulagada
73 Suryanarayana Rao
74 T. Vinod Babu
75 V. Gangadhara
76 Vamsi V
77 Venkatrama Reddy
78 Vennela Balaji

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Objectors/Officials/Public who participated during hearing

held on 19-10-2021
S.No Name
79 Venugopala Rao
80 Vijay Reddy
81 Vivek Chandra P

Objectors/Officials/Public who participated during hearing

held on 01-11-2021
S.No Name
1 AP Ferro Alloys Prod.
2 Adv Rajesh Raktate
3 Advocate Sricharan
4 Anannya Ghosh
5 APCPDCL Corporate Office
6 APSPDCL
7 APSPDCL co tpt
8 Gopinath Injeti
9 Gunaranjan Challa
10 Kotirao Peravali
11 Lakshana Viravalli
12 Manukonda Upendra Rao
13 Murali Krishna Ponnakanti
14 Nethan Reddy
15 Nivedita Saxena
16 Pattabhi Raghu Raman
17 RAC AP
18 RAC-APEPDCL
19 Rahul M
20 Rajanikanth Reddy
21 Rajkumar Geddam
22 Ravi Alladi
23 Satish Shrikhande
24 Shiva Rao P
25 Shivkumar
26 Shreekant Vijay Dhuri
27 Srilatha Alajangi
28 Srinivasu
29 Srinivasa Cotton & Oil
30 Venugopala Rao
31 Vivek Chandra P
32 Yoganand Paluru

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ANNEXURE -13
PAPER NOTIFICATION

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ANNEXURE-14
APTRANSCO Paper Notification

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Aggregate Revenue
14 Requirement (ARR) (10+13) 1266.96 998.56 1265.74 1692.63 1959.37 7183.25
Total Revenue
15 (15.1 + 15.2 + 15.3) 1113.69 1195.08 1140.60 1482.68 1722.50 6654.55
15.1 Non Tariff Income 71.63 123.26 166.18 102.60 201.36 665.03
15.2 Revenue from Tariff 1042.06 800.48 974.42 1380.08 1521.14 5718.18
True Down as per APERC Order
15.3 Dt:07.11.2015 271.34 271.34
16 Net Revenue Gap (15-14) -153.27 196.52 -125.14 -209.95 -236.87 -528.71

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Computations of the Commission- True up of Transmission
business (APTRANSCO) for 3rd CP (Rs. Crs.)
Sl.
Items 2014-15 2015-16 2016-17 2017-18 2018-19 Total
No
1 Assets (1.1 + 1.2) 5557.76 6681.70 8733.73 10552.04 12732.13 44257.36

1.1 Original Cost of Fixed Assets (OCFA) 4971.19 5557.76 6681.70 8733.73 10552.04 36496.42
1.2 Additions to OCFA 586.57 1123.94 2052.03 1818.31 2180.09 7760.94
2 Depreciation (2.1 + 2.2) 2519.00 2792.54 3128.19 3646.89 4260.91 16347.53

2.1 Opening Balance 2233.03 2519.00 2792.54 3128.19 3646.89 14319.65

2.2 Depreciation during the year 285.97 273.54 335.65 518.70 614.02 2027.88
Consumer Contribution
3 (3.1 + 3.2) 740.54 876.37 1203.37 910.72 1107.97 4838.97
3.1 Opening Balance 738.86 740.54 876.37 703.77 910.72 3970.26

3.2 Additions during the year 1.68 135.83 327.00 206.95 197.25 868.71

4 Working Capital (4.1 + 4.2) 74.95 47.51 55.58 65.63 83.43 327.09
4.1 O&M (45 days Net O&M Expenses) 74.95 47.51 55.58 65.63 83.43 327.09

4.2 O&M Stores Inventory 0.00

5 Change in Rate Base (1.2-2.2-3.2)/2 149.46 357.29 694.69 546.33 684.41 2432.18
6 Regulated Rate Base (1.1-2.1-3.1+4+5) 2223.71 2703.02 3763.06 5513.73 6762.27 20965.79

7 Capital Structure
7.1 Debt @ 75% 75% 75% 75% 75% 75%

7.2 Equity @ 25% 25% 25% 25% 25% 25%

8 Cost of Funds (percent)

8.1 Cost of Debt (percent) 12.00% 10.59% 11.03% 9.98% 8.62%

8.2 Return on Equity(percent) 14% 14% 14% 14% 14%

9 WACC (7.1x8.1)+(7.2x8.2) 12.50% 11.44% 11.77% 10.99% 9.97%

Return on capital Employed
10 (6 x 9) 277.96 309.29 443.01 605.68 673.86 2309.80

11 Expenditure (11.1 to 11.7) 1041.31 787.02 929.68 1156.72 1376.93 5291.66

11.1 Gross O&M Costs 696.92 483.13 557.73 602.10 768.10 3107.98

11.2 O&M Carrying Costs 0.00 0.00 0.00 0.00 0.00 0.00

11.3 Depreciation 286.14 273.54 335.65 518.70 604.29 2018.32

11.4 Taxes incl. MAT 36.99 28.58 33.47 35.92 4.54 139.50

11.5 Special Appropriation 0.00 0 0 0 0 0.00

11.6 Other Expenditure 21.26 1.77 2.83 0.00 0.00 25.86

11.7 Terminal Benefits 0 0 0 0 0 0.00

12 Expenses Capitalized (12.1 + 12.2) 89.01 97.75 106.94 69.78 91.42 454.90

12.1 IDC Capitalized

12.2 O&M Expenses Capitalized 89.01 97.75 106.94 69.78 91.42 454.90

13 Net Expenditure (11-12) 952.31 689.27 822.73 1086.94 1285.51 4836.76

Aggregate Revenue Requirement (ARR)
14 (10+13) 1230.27 998.56 1265.74 1692.63 1959.37 7146.56

15 Total Revenue (15.1 + 15.2 + 15.3) 1113.69 1195.08 1140.60 1482.68 1722.50 6654.55

15.1 Non Tariff Income 71.63 123.26 166.18 102.60 201.36 665.03

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15.2 Revenue from Tariff 1042.06 800.48 974.42 1380.08 1521.14 5718.18
True Down as per APERC Order
15.3 Dt:07.11.2015 271.34 271.34

16 Net Revenue Gap (15-14) -116.58 196.52 -125.14 -209.95 -236.87 -492.02

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